The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) held that the proceedings initiated under Section 148 of the Income Tax Act, 1961 for the incriminating material found against a person other than the searched person is beyond the jurisdiction.
The appellant firm purchased a piece of land measuring 52152 sq.ft. known as “Minerva Mills Property, Bangalore, from K/s. National Textile Corporation (APKK & M) Ltd. for a consideration of Rs.8,90,00,000/-. Thereafter the assessee entered into an agreement with M/s. Sobha Developers Ltd. for sale of the said property for a consideration of Rs.10,05,00,000/-. This was found during a search conducted in the case of one M/s. Davanam Jewellers Pvt. Ltd.
The Assessing Officer formed an opinion that the appellant had transferred land purchased from M/s. NTC Ltd. to M/s. Sobha Developers Ltd., and thereupon derived a profit of Rs.1,15,00,000/- taxable which was not offered to tax.
The appellant was served with a notice issued under Section 148 of the Income Tax Act under the signature of the Deputy Commissioner of Income Tax (DCIT), Bangalore, and the proceeding was ultimately finalized upon making an addition of Rs.1,15,00,000/- on account of capital gain, which was, in turn, confirmed by the First Appellate Authority.
The Authorized Representative submitted that the reopening based on any material and/or information obtained/unearthed during the course of the search under Section 132 of the Income Tax Act in case of other than the searched person ought to have been initiated under the provision of Section 153C of the Income Tax Act and not the impugned proceeding under Section 147 of the Income Tax Act.
The Departmental Representative vehemently argued in support of the order passed by the Revenue under Section 147/148 of the Income Tax Act. According to him, the application of law has been rightly made.
The Two-member bench comprising of Chandra Poojari (Accountant member) and Madhumita Roy (Judicial member) held that “as per the un-amended provision of Section 153C of the Income Tax Act, the proceeding against the persons other than the searched person was on the basis of seized and/or requisition “belongs or belong to” the person other than the searched person”.
The provision laid down under Section 148 of the Income Tax Act was followed by the Assessing Officer in reopening the assessment against the assessee. Such wrong initiation of proceeding by issuing notice under Section 148 of the Income Tax Act culminating into the order of addition under Section 147 of the Income Tax Act, was, therefore, found to be without any jurisdiction, and hence, the same was set aside. Thus, the appeal was allowed.
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