ITAT Quashes Tax Additions Against Couple, Rules Section 153C Satisfaction Invalid [Read Order]

The Income Tax Appellate Tribunal (ITAT) Delhi Bench has overturned tax additions of Rs.42.94 lakh each against Gurgaon-based couple Rachita Sahgal and Vivek Sahgal, holding that the department incorrectly invoked Section 153C of the Income Tax Act. The bench ruled that the seized documents only "pertained to" rather than "belonged to" the assessees, making the assessment legally untenable.

The case originated from a January 2018 search action against M/s Navneet Dawar group, where documents allegedly showing unaccounted property transactions were recovered. The tax department claimed these documents "belonged to" the Sahgals and made identical additions of Rs.42.94 lakh in their hands for assessment year 2018-19. The couple, though absent during hearings, contested the additions through written submissions.

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The Bench Comprising Satbeer Singh Godara (Judicial Member) and S. Rifaur Rahman (Accountant Member) scrutinized the legal validity of the assessment. They observed that post-2015 amendments to Section 153C(1)(b) clearly differentiate between documents that "belong to" an assessee (applicable to money/bullion under clause a) versus those that "pertain to/relate to" them (under clause b). The seized papers fell under the latter category, making the department's satisfaction note legally flawed.

The tribunal further rejected the department's reliance on Section 292C's presumption, clarifying this only applies against persons from whom materials are seized, not third parties like the Sahgals. Without independent evidence corroborating the alleged on-money payments, the additions couldn't be sustained.

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Pronouncing the order, the bench allowed the appeals, deleting the additions entirely. The ruling emphasizes strict compliance with Section 153C's amended legal requirements, particularly the distinction between "belonging to" and "pertaining to" documents during search assessments.

While no specific precedents were cited, the decision aligns with the legislative intent behind Section 153C's 2015 amendment, which narrowed the scope for assessing third parties in search cases.

The department's argument that Exhibit-13 (seized documents) justified the additions failed, as the tribunal found no substantive linkage between the materials and the couple's income. This marks another instance where ITAT has invalidated assessments based on improper Section 153C invocation, protecting taxpayers from additions lacking legal grounding.

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To Read the full text of the Order CLICK HERE

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