The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) upheld the reassessment under section 147 of Income Tax Act,1961, stating that no material directly relating to the assessee was found during the search.
The Revenue-appellant contested the CIT(A)’s deletion of a Rs. 6.70 crore addition, including share premium, treated as bogus accommodation entries received by the assessee from shell entities controlled by Shri Shirish C. Shah. The tribunal found that the CIT(A) ignored strong evidence, including admissions by Shri Shah and associates, and remanded the case for reconsideration, allowing the Revenue’s appeal.
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In this case the Blueray Trading Pvt. Ltd.,respondent-assessee,filed a cross-objection challenging the reopening of the assessment under section 147, arguing it was invalid. While the first ground was dismissed as not pressed, the assessee claimed the assessment should have been under section 153C, citing court rulings invalidating similar cases under section 147.
The assessee’s counsel argued that if material found during a search on one person relates to a third person, the assessment of that third person should be done under section 153C of the Act. He explained that the law initially used the word “belonging” but was later amended to “pertaining,” with the Supreme Court confirming both terms meant the same.
The counsel claimed the reopening of the case was based on material found during a search on Shri Shrish C Shah, who was involved in providing fake accommodation entries, and that the assessment should have been done under section 153C of the Act.
The Revenue counsel disagreed, saying section 153C only applies when material directly related to the third person is found during the search. In this case, the search on Shri Shrish C Shah did not reveal material about the assessee but showed that the assessee received fake share capital through bogus entities. So, the Revenue counsel argued that the assessment under section 147 was correct.
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When asked to show any material directly related to the assessee from the search, the assessee’s counsel couldn’t provide any. The only document was an Excel sheet listing share capital entries, which were already accounted for and didn’t show anything negative.
The two member bench comprising T.R Senthil Kumar ( Judicial Member ) and Annapurna Gupta ( Accountant Member ) agreed with the revenue counsel stating that since no material related to the assessee was found during the search, the assessment under section 147 was valid. Therefore, the claim for assessment under section 153C was rejected.
In short,the cross objection field by the assessee was dismissed.
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