TaxTMI 
TaxTMI 
2014 (7) TMI 1384
X X X X Extracts X X X X
X X X X Extracts X X X X
....u on 4.12.2007, the assessing officer initiated proceeding u/s 153C of the Incometax Act on 15.12.2008 calling upon the assessee to submit his return of income. The assessing officer completed the assessment u/s 153C of the Act by disallowing the agricultural income declared by the assessee in the original return of income filed by him treating it as unexplained credit. The assessee challenged the addition made in appeal preferred before the CIT(A). Before the CIT(A), the assessee challenged the validity of the proceeding initiated u/s 153C of the Act as well as the merits of the additions made by the assessing officer. The CIT(A) while upholding the validity of proceeding u/s 153C of the Act allowed 50% of the income declared as agricultural income. In other words, the CIT(A) sustained 50% of the addition made by the assessing officer as unexplained credit. Still being aggrieved of the order of the CIT(A), the assessee has preferred the present appeal. 4. We have heard the parties perused the orders of the revenue authorities as well as other materials on record. We have dealt with identical issue in case of another group company viz. M/s. Avinash Estates & Resorts Ltd. in ITA No....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed to be incriminating materials so as to empower the assessing officer to initiate proceedings u/s 153C of the Act. Section 153C of the Act cannot be interpreted in a manner to contemplate that any material which has a reference to the assessee, whether it is incriminating or not can be used as a tool to launch a proceeding u/s 153C of the Act. If Section 153C of the Act is to be interpreted in such a narrow manner then any innocuous material found during a search of third party and has any reference to the assessee then it will lead to a proceeding u/s 153C of the Act. That cannot be the intention of legislature. As would be clear from the assessment order, the income which the assessing officer has sought to assess in the assessment order passed u/s 143(3) of the Act read with section 153C of the Act has already been reflected in the books of accounts of the assessee maintained in regular course as well as disclosed in the return of income filed by the assessee prior to the search. Only on the basis of some enquiry conducted at the time of assessment proceedings, the assessing officer has formed an opinion that the agricultural income reflected in the books of accounts and discl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he ratio laid down therein, we observe that the decisions are distinguishable on facts and do not apply to the facts of the assessee's case. In that view of the matter, we do not find any infirmity in the order of the CIT(A) in holding the initiation of proceedings under section 153C to be ab initio void and consequently annulling the assessments for all the aforesaid assessment years. Accordingly, we uphold the same by dismissing the grounds taken by the department." 9. The ITAT Vizag Bench again in case of Gadiraju Venkata Subba Raju Vs. DCIT and another ITA No. 360 & 361/Vizag/2013 dated 5.3.2014 considering identical issue on proceeding initiated u/s 153C of the Act in absence of incriminating material held as under: "9. We have heard the contentions of the parties and perused the orders of the revenue authorities as well as other materials on record. We have also carefully applied our mind to the decisions relied upon by the parties. It is apparent from the assessment order that the assessing officer has proceeded u/s 153C of the Act. However, we may observe that while dealing with assessee's ground on this issue in para-7 of his order extracted herein above, the CI....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... section 148, section 149, section 151, and section 153, where the AO is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the AO having jurisdiction over such other person and that AO shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A" 10. A plain reading of the aforesaid provision makes it clear that two conditions have to be satisfied for initiating proceedings under section 153C of the Act. Firstly, the AO must be satisfied that the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A. Secondly, after being satisfied that it belongs to a person other than the persons to whom seized, he shall handover the seized material to the AO having jurisdiction over such other p....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... TH/HNR/2 is a receipt of HNR Constructions which reflects receipt of Rs. 1,50,000/- from Sri K. Bangraju vide a cheque towards plot advance. Page No. 32 also belongs to HNR Constructions which shows the disbursement schedule given by licensed engineer Sri K. Krishna Prasad. This pertains to HNR Constructions and it also has nothing to do with the assessee. The entire payment shown on the paper total-up to around Rs. 10 to Rs. 12 lakhs and there is nothing in this paper to show that this belongs to the assessee trust or has any connection with it. Page 61 contains certain calculations which do not suggest that it has anything to do with assessee trust. Page No. 64 is no doubt a letter signed by the Chairman and Managing Trustee of Sri Rama Educational Trust. The letter is a certificate issued to whom-so-ever it may concern, certifying that certain works of construction are entrusted to M/s. HNR construction, a proprietorship concern of Sri Tangi Hari Narayana. This though is on assessee's letter head is a general certificate which is issued to HNR Construction and there is nothing either incriminating in this document suggesting any unaccounted transact....
X X X X Extracts X X X X
X X X X Extracts X X X X
....provides that where the AO is satisfied that any money, bullion, jewellery _or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in s. 153A he shall proceed against "each such other person and issue such other person notice and assess or reassess income of such other person. However, there is a distinction between the two provisions in as much as under s. 153C notice can be issued only where the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong to such other person, whereas under s. 158BD if the AO is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under s. 132 or whose books of account or other documents or assets were requisitioned under s. 132A, he shall proceed against such other person under s. 158BC. 13. Thus a condition precedent for issuing notice under s. 153C and assessing or reassessing income of such other person, is that the money, bullion, jewellery or other valuable article or thing or books of account or documents sei....
X X X X Extracts X X X X
X X X X Extracts X X X X
....So far as the assessment years 2004-05 and 2005-06 are concerned, perusal of the assessment orders passed in those years would reveal the fact that the determination of income is on the basis of the impounded materials as a result of survey and not on the basis of any seized materials belonging to the assessee. In the aforesaid circumstances, the pre conditions for assuming jurisdiction under section 153C are not satisfied. So far as the decisions relied upon by ld D.R. in support of his contention, after carefully applying our mind to the ratio laid down therein, we observe that the decisions are distinguishable on facts and do not apply to the facts of the assessee's case. In that view of the matter, we do not find any infirmity in the order of the CIT(A) in holding the initiation of proceedings under section 153C to be ab initio void and consequently annulling the assessments for all the aforesaid assessment years. Accordingly, we uphold the same by dismissing the grounds taken by the department." 10. The ITAT Delhi Bench in case of V.K. Fiscal Services Pvt. Ltd. Vs. DCIT in ITA Nos. 5460 to 5465/Del/2012 on a conspectus of decisions of different high courts as well as differ....