The Ahmadabad bench of Income Tax Appellate Tribunal (ITAT) has recently held that amendment in section 153c Income Tax Act 1961 was prospective and the material found from premises of searched persons should belong to such person to initiate proceedings.
Section 153C Income Tax Act 1961 provides that assessment of income of person other than the person whose case search has initiated or assets have been requisitioned.
Assessment of income of a person other than the person in whose case search has been initiated or books of account, other documents or assets have been requisitioned
Assessee Soniz Procon (P.) Ltd. is a Company engaged in the business of development and construction of residential and commercial complexes. The assessee follows Project completion method of accounting and filed its Returns of Income of the various projects undertaken by the assessee.
There was search action under section 132 of the Act, carried out in the case of Sanket Jitendrabhai Shah on 04.12.2014, and found a certain flat list. As per the Assessing Officer( AO), the above sheet included the details of 76 flats in Vibrant Homes Project carried out by the assessee.
Parallelly there was Survey action under section. 133A of the Income Tax Act 1961 was conducted in the case of the assessee and nothing was found from there certain loose papers were impounded during the course of the survey.
Due to the search procedure conducted on the premises of Sanket Jitendrabhai Shah AO initiated proceedings under section 153C Income Tax Act 1961 in the case of the assessee and additions on account of unaccounted income under section 69A Income Tax Act 1961 of the Act by way of suppressed on-money receipts, treating the same as unexplained cash credits were made in the all the assessment years and demanding tax thereon.
Against the order, assesee filed first appeal before the Commissioner of Income Tax Appellate Tribunal CIT (A). Thus verifying the contentions and material produced by the both parties the CIT (A) passed an order in favor of the assessee .
Aggrieved revenue thereafter filed an appeal before the ITAT.
Mahesh Chhajed counsel for the assessee submits that Material found at the place of Sanket Jitendrabhai Shah was “not belonging to the assessee” but pertaining/relating to the assessee, which is not in accordance to the provisions of section 153C of the Act prevailing on the date of search.
Further the excel sheet containing the information “relating to the assessee” admittedly “did not belong to the searched person”, therefore, as on the date of the search namely 04.12.2014, the essential jurisdictional requirement to justify assumption of jurisdiction under section 153C in case of the assessee did not exist.
The amended provisions have been expressly brought into force with effect from 01.06.2015. However the search action in the case of Sanket Jitendrabhai Shah was held on 04.12.2014 which is prior to 01.06.2015.
Sudhendu Das counsel for the revenue relied upon the decision of assessing officer and submitted that section 153 C of Income Tax Act 1961 will apply to the case of assessee.
After considering the contentions of the both parties the division bench of the ITAT comprising Waseem Ahmed, (Accountant Member) and T.R. Senthil Kumar, (Judicial Member) dismissed the appeal filed by the revenue and observed that, post amended section would be applicable prospective only on the search conducted on or after 1.6.2015. Hence, prior to the amendment the material found from the premises of the searched person, should be belonging to the person in whose case the material is to be used for drawing satisfaction and for issuance of notice under section 153C Income Tax Act 1961.
Therefore the assessments made by the Assessing Officer invoking the amended provisions of Section 153C of the Income Tax Act 1961 are legally not tenable and the additions are liable to be deleted.
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