Materials used in Third Party Premises cannot be used against the assessee in section 153A assessments: ITAT [Read Order]

The Income Tax Appellate Tribunal recently ruled that Materials used in third party premises cannot be used against the assessee in section 153A of the Income Tax Act assessments.

The tribunal bench comprising of Judicial Member N.V.Vasudevan and Accountant Member M. Balaganesh were held so while all these appeals of the assessee are directed against the independent orders passed by the Learned Commissioner of Income Tax (Appeals) – 21, Kolkata.

In instant case, there was a search and seizure operation conducted u/s 132 of the income tax Act on the Cygnus Group of Cases comprising of various companies and individuals at various residential premises / offices.

The search warrant was carried in the name of assessee since he is one of the key individual in the said group. Consequent to the search, notice u/s 153A of the Act was issued in response to which, the assessee filed his return. Hence the income assessed originally thereon either u/s 143(3) or u/s 143(1) or the returned income, as the case may be, could not be disturbed unless there is any incriminating material found in the course of search relatable to such assessment year.

The AO was of the opinion that the assessee had converted his unaccounted cash and brought the same in the form of long term capital gains which was shown as exempt income in connivance with the share brokers and the Calcutta Stock Exchange Ltd. On contrary to this the assessee stated that the seized document relied upon by the AO was not seized from the premises of the assessee during the course of search but the same was seized in the business premises of Cygnus Equipment & Rentals Pvt Ltd and other companies in the course of search pursuant to an independent search warrant issued on them as could be evident from the panchaname drawn in the name of the said companies.

The CIT(A) upheld this action on the legal ground by observing as under the argument of the assessee that no incriminating document was found or considered while framing the assessment orders is not correct.

Aggrieved assessee is in appeal before the tribunal bench and the counsel for the revenue submitted that the expression ‘incriminating material’ is not found in the provisions of the Act and it is only the Courts which had imported those words while rendering the decisions.

He further argued that the documents seized in the business premises of the group companies of the assessee also could be very well used in the section 153A proceedings of the assessee, which has been rightly done by the AO in the instant case.

The tribunal bench heard rival submission and found that the seized document used by the AO for making the addition which were seized only from the office premises of Cygnus group of companies in which assessee is a director. In this regard, it would be pertinent to note that as per section 292C of the Act, there is a presumption that the documents, assets, books of accounts etc. found at the time of search in the premises of a person is always presumed to be belonging to him / them unless proved otherwise.

The tribunal opinioned that the provisions of section 132 of the Act relied upon by the revenue would be relevant only for the purpose of conducting the search action and initiating proceedings u/s 153A of the Act.

Finally, the Tribunal bench held that the assessments for the assessment Years 2009-10 and 2012-13 fall under the category of completed assessments and hence the additions made by the AO which are contested before the bench by the assessee cannot be made in the assessments framed u/s 153A of the Act as they are not backed by any incriminating materials found in the course of search.