Cash Seized During 2019 Elections: ITAT Quashes Assessments u/s 153A for Failure to Issue Certificate u/r 112F [Read Order]

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has set aside the assessment orders and ruled that the proceedings under Section 153A of the Income Tax Act, 1961, were invalid due to non-compliance with Rule 112F and CBDT Circular No. 10/2012.

Vijay Madan Varma (assessee), an individual faced scrutiny following the seizure of Rs. 10,00,000 in cash and a red cash voucher book during the 2019 General Elections. On the Static Surveillance Team at Anand Nagar intercepted a vehicle in which the assessee was present.

The cash and voucher book were impounded under Section 131, and a requisition under Section 132A was made on 30/04/2019. Based on this, the Assessing Officer (AO) initiated proceedings under Section 153A, issuing notices for the six preceding assessment years and AY 2020-21.

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The AO made additions of Rs. 26,87,300 for AY 2019-20, based on cash receipts from the voucher book and increased turnover, and Rs. 17,00,266 for AY 2020-21, including the seized cash and other receipts, while denying a deduction claim under Section 54. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO’s order.

Aggrieved by the AO’s order, the assessee appealed to the ITAT. The assessee raised additional legal grounds challenging the validity of the Section 153A proceedings and argued that the AO failed to follow Rule 112 F read with the third provision to Section 153A and CBDT Circular No. 10/2012, which restrict assessments for prior years in election-related seizures.

The assessee contended that the cash seizure occurred during the 2019 election period, falling under Rule 112F, which exempts the AO from issuing notices for six prior assessment years unless specific evidence necessitates further investigation.

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The two-member bench comprising Amit Shukla (Judicial Member) and Prabhash Shankar (Accountant Member) examined the AO’s report, which admitted no certificate was issued. The tribunal observed that Rule 112F, introduced under the Finance Act, 2012, and clarified by the CBDT Circular, aims to reduce unnecessary proceedings when cash is seized during elections on a single warrant without evidence for prior years.

The tribunal found that the seizure occurred in a parliamentary constituency during the election period, and the red cash voucher book, impounded alongside the cash, did not justify further investigation for prior years.

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The tribunal held that the AO’s issuance of Section 153A notices for six prior years violated Rule 112F, as no certificate was issued to justify the extended assessments. The tribunal quashed the assessment orders for AY 2019-20 and 2020-21, deeming the proceedings legally invalid.

The appeal of the assessee was allowed.

To Read the full text of the Order CLICK HERE

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