In Principal Commissioner of Income Tax v. Vanita Chaurasiya, the division bench of the Delhi High Court held that the materials seized from a real estate broker relating to the assessee cannot be used as an evidence to initiate re-assessment proceedings against the assessee under section 153C of the Income Tax Act.
While dismissing the department appeal against the order of the Delhi ITAT, the Court found that the assessment is not valid since the material so seized was not “belong” to the assessee.
In the instant case, a search and seizure conducted on the residence of a real estate broker resulted in recovery of certain documents relating to the assessee. Consequently, the AO re-opened assessment against the assessee under section 153C of the Income Tax Act.
The assessee maintained that initiation of proceedings is illegal since the documents recovered during the search was not “belonging” to the assessee.
On second appeal, the Appellate Tribunal struck down the order on ground that it was passed without jurisdiction. Hence, the department approached the High Court against the ITAT order.
The division bench comprising of Justice S. Muralidhar and Justice Chander Sekhar observed that the search in the present case took place on 19th June 2009 i.e., prior to the amendment in Section 153 C (1) of the Act with effect from 1st June 2015. As per the amendment, if the search resulted in disclosure of any materials relating to any other person other than the assessee under section 153A, then the Officer shall hand over such materials to the Assessing Officer having jurisdiction over such other person.
The bench noticed the decision in Pepsico India Holding Ltd., a similar case, wherein the Court held that the mere fact that such photocopy of the sale deed was found with the broker would not lead to the conclusion that such a document ‘belongs to‟ either the vendor or the vendee.
The bench noticed the fact that, in the present case, the AO in his satisfaction note does record that the document in question does not belong to Mr. Lalit Modi i.e. the searched person, he does not indicate on what basis he proceeds as if the document belonged to the Assessee.
“There is, therefore, nothing to contradict the categorical finding of the ITAT that the document which formed the main basis for initiation of the proceedings under Section 153C of the Income Tax Act does not belong to the Assessee. One of the principal conditions for attracting Section 153C of the Act is, therefore, not fulfilled in the present case.”
Read the full text of the Order below.
