No Reassessment of Income if Incriminating Articles Against Any "Other Person" is Found During Search Other Than Person Being Searched: ITAT [Read Order]

Quashing the Income Tax addition, the Delhi Bench of Income Tax Appellate Tribunal (ITAT), held that no reassessment of income under Section 147 of the Income Tax Act 1961 can be allowed if incriminating articles against any "other person" is found during search other than person being searched under Section 153C of Income Tax Act.

The assessee Narendra Kumar filed return declaring income of Rs. 9,05,470/- for Assessment Year 2012-13. In a search carried out on Santosh Group of Medical Institution, Ghaziabad, it was found that the assessee has paid cash in form of donation/capitalization fees amounting to Rs.7,00,000/- during the Financial Year 2011-12 relevant to Assessment Year 2012-13, the said fact has been admitted by the Chairman of the Group in a concession recorded under Section 132(4) of Income Tax Act.

The case was taken up for scrutiny and assessment under Section 148 and 147 of the Income Tax Act and was completed determining income at Rs. 16,05,470/- by making addition of Rs. 7,00,000/- under Section 68 of the Income Tax Act treating the same as unexplained income.

Aggrieved by the assessment order, the assessee filed an Appeal before the Commissioner of Income Tax (Appeal) [CIT (A)], which was dismissed. Then the assessee filed an appeal before Income Tax Appellate Tribunal (ITAT).

The Authorised Representative (AR) on behalf of assessee contended that the order of the Lower Authorities are not sustainable as the assessment should have been made only under Section 153C of Income Tax Act since the reopening has been done on the basis of ‘documents/information found during the course of search’.

The Departmental Representative relied on the orders of the Lower Authorities.

The Bench comprising of Dr. B. R. R. Kumar, Accountant Member and Yogesh Kumar U.S., Judicial Member observed that reassessment was initiated on the basis of incriminating material found in search of third party.

The Bench held that the incriminating material was found and seized during the search carried out of ‘some other person’ that a sum of Rs. 7,00,000/- had been paid by the assessee during the Financial Year 2011-12 to Santosh Medical College, Ghaziabad, and since the assessee was not assessed under Section 153C of Income Tax Act, which provision specifically exclude the operation under Section 147 of Income Tax Act, the A.O erred in invoking provision to Section 147 of Income Tax Act instead of those of Section 153C of Income Tax Act.

Hence, ground of the assessee that person relating to whom some material is found in the search of some ‘other person’, should be assessed under Section 153C of the Income Tax Act and not under Section 147 of Income Tax Act was allowed and consequently assessment order and the order of the CIT (A) were quashed.

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