No Separate Search Warrant required to Brothers who are Involved in Common Business: Delhi HC upholds Addition [Read Judgment]

In the Case, Vinod Kumar Gupta vs Deputy Commissioner of Income Tax, Delhi High Court recently ruled that no separate search warrant is required to brothers who are involved in common business and also upholds the addition made by the Assessing Officer.

The assessee is an individual in the instant case Mr.Vinod Kumar Gupta has filed his return of income for the relevant assessment year and declared total income at Rs. 3,80,610.

During the year a search was conducted by issuing the notice at the premises of the Assessee and his brother Mr Suresh Kumar Gupta who were engaged in a common business and certain documents were seized from the premises of S.K. Gupta, from his residential and office premises. While completing the assessment the AO made some additions based on the seized documents and recomputed the total income at Rs. 92,16,098. He was of the opinion that the overall facts and circumstances of the case, the percentage of the income based on the statements made, were attributable to the income of the assessee and he also made the addition of Rs. 92,16,098 on account of unaccounted expenditure on the marriage of the son and daughter of the assessee was made.

Thereafter, the Assessee approached the Tribunal by appeal and contended that in the absence of any satisfaction recorded in terms of Section 153C(1) of the Act, since the seizures relied upon in the final assessment pertained to him but were made in the course of the proceedings and search of his brother’s premises  the materials so seized became third-party material for which notice was mandatorily required. Further, he argued that in the absence of a notice under Section 153C of the Income Tax Act, the assessment was illegal.

However, the Tribunal refused to accept the contentions of the Assessee and also rejected the appeal filed by him. Then the Assessee carried the matter before the Court on further appeal.

The division bench comprising of Justice S.Ravindra Bhat and Justice A.K.Chawla observed that “the Assessee in the present case was challenged the invalidity of the search assessment in the absence of notice under Section 153C. While perusing the available material facts on records it is clear that the search warrant was issued in the name of S.K. Gupta. The panchnama drawn was signed by both the assessee and S.K. Gupta and the statements of both S.K. Gupta and Vinod Gupta were recorded on the same date”.

“Furthermore, the documents, cash and other books of accounts seized pointed to such circumstances that the Revenue was justified in arguing that a separate notice under Section 153C was unnecessary. These facts are that both the assessees are brothers. Both were involved in the common business and the assessee used to be in-charge of the accounts. Given these, there was no necessity of issuing notice under Section 153C and following the separate but elaborate procedure prescribed therein”, the bench added.