MoU found during Search can’t be treated as ‘belong to Assessee’ as it does not contain Signature of Assessee: ITAT [Read Order]

In the recent ruling, Arsh Home Private Ltd v. Deputy Commissioner of Income-tax (DCIT), the Delhi bench of Income Tax Appellate Tribunal (ITAT) held that Memorandum of Understanding found during the search cannot be treated the same as ‘belong to Assessee’ since it does not contain the signature of the Assessee.

The Assessee in the instant case is a private limited company duly filed its return of income for the relevant Assessment year and declared loss of Rs. 13,869.

During the assessment period, the Assessing Officer (AO) noticed that the Assessee-Company was entered into transaction of bulk investment in flats or commercial space with M/s Ultra Home Construction Pvt. Ltd. it was found during the search a Memorandum of Understanding between the Assessee Company and M/s Ultra Home Construction Pvt. Ltd. which contained details of payments, including cash payment and assured return on investment. Only on the basis of the MoU, the AO recorded satisfaction and initiated proceedings under section 153C of the Income Tax Act 1961. However, the assessment was completed while declaring total income at Rs. 9,86,131 after making additions or disallowance as against the loss of Rs. 13,869 filed by the Assessee in its earlier returns.

On appeal, the CIT(A) dismissed the submissions of the Assessee and upheld the decision of the AO and confirmed the proceedings initiated by him. Thereafter the Assessee carried the matter before the Tribunal against the order of the authority.

Before the bench, the counsel for the Assessee advocate Anil Kumar Jain submitted that assessment proceedings under section 153C of the Act, on the basis of MoU seized during the course of search and seizure operation of the third party on the presumption that the same belonged to the Assessee is bad in law. Further, he argued that the MoU seized cannot be said to ‘belong to’ the assessee and being unsigned MoU, no proceedings under the said section of the Act can be initiated against the Assessee.

After considering the facts and circumstances of the case, the Tribunal bench consists of President G.D.Agarwal and Judicial Member Suchitra Kamble jointly objected the findings of the lower authorities and observed that “while perusing the available materials on records it is clear that the AO initiated the proceedings only on the basis of the aforementioned MoU. But the said MoU does not bear the signature of the assessee. Thus, finding of the document in the premises of M/s Ultra Home Constructions Pvt. Ltd does not constitute that the document to be belonging to the assessee”.