Assessment Order framed u/s 153A based upon Documents Recovered by Search from 3rd party without Following Procedures as per S.153C of Income Tax Act: ITAT deletes Addition [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has deleted the addition as the assessment order was framed under Section 153A of the Income Tax Act 1961 based upon the documents recovered by the search from the 3rd party without following the procedures as per Section 153C of the Income Tax Act.

There was a search and seizure operation under Section 132A of the Income Tax Act, 1961 conducted on 04.02.2009 in the case of Zoom Developers Pvt. Ltd and the residential as well as Office premises of Ramneek Bawa, CEO of Zoom Developers Pvt. Ltd. In the assessment order, the Assessing Officer further noted that on going through the seized material, it was noticed that in the Office of Zoom Developers Pvt. Some incriminating documents were found which disclosed that Ramneek Bawa, the assessee was handed over the cash amounts on various dates by the company which was not recorded in the Return of Income filed by the assessee.

Regarding the amount, the assessee submitted that this amount must have been transferred from Head Office to the Branch Office for various time to time expenses. This amount did not pertain to any personal income received by the assessee from the company that the same must have been received and accounted by the Branch Office. However, the Assessing Officer was not satisfied. He observed that the assessee himself accepted that his annual salary income was Rs.1.31 crores instead of Rs.80.59 lacs as declared by the assessee. Entire amount was treated as undisclosed income of the assessee.

R. S. Singhavi, appeared on behalf of the assessee submitted that in this case, the addition was based upon one sheet of paper found on the premises of Zoom Developers Pvt. Ltd., that these were with reference to various expenses pertaining to Zoom Developers Pvt. Ltd. incurred through the assessee. Based on the 3rd party document, the Assessing Officer considered the additional vide order under Section 153A of Income Tax Act even though the same was a 3rd party document and even without considering that the action had already been taken in the case of Zoom Developers Pvt. Ltd.

He further submitted that with reference to the said document, the Assessing Officer neither initiated proceedings under Section 153C of the Income Tax Act nor recorded requisite satisfaction as provided as per statutory requirement of Section 153C of the Income Tax Act.

It was further submitted that hence there was no valid basis for assuming jurisdiction and consequential addition in the case of the assessee.

It was further submitted that the said income had already been subjected to tax in the case of the company, hence there was no valid basis for taxing the same again in the case of the assessee.

P. N. Barnwal appeared on behalf of the revenue relied upon the order of the authorities below.

The two-member Bench of Shamim Yahya, (Accountant Member) and Yogesh Kumar Us, (Judicial Member) observed that having not followed the mandate of section 153C of the Act, Revenue had committed fatal error and, on this account, assessment was liable to be quashed. He relying upon the judgement of Delhi High Court in the case of PCIT vs. Surya Agrotech Infrastructure Ltd which held that when undisclosed income already having been taxed in hands of Flagship Company the same could not be again subjected to tax in the hands of assessee company, allowed the appeal filed by the assessee.

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