The Income Tax Appellate Tribunal (ITAT), Bangalore Bench held that Proceedings under Section 153C of the Income Tax Act, 1961 in absence of any incriminating material is bad in law.
A search action under Section 132 of the Income Tax Act was initiated in the case of M/s MS Ramaiah Developers and Builders Pvt Ltd. It has been stated in the assessment order that several documents were seized in the course of the search and that ‘some documents had a bearing on total income’ of the Respondent, Mathikere Ramaiah Seetharam.
The Respondent was provided with copy of the documents seized in the course of above search and which in view of the learned assessing officer had a bearing on the Respondent’s income. These seized document on the basis of which proceedings under Section 153C of the Income Tax Act have been initiated in the Respondent’s case is nothing but Copy of Development Agreement between the Respondent and M/s. G Corp Homes Pvt Ltd (developer).
In the assessment order passed for AY 2014-15, the Respondent’s returned income had been accepted without any variations. In the original assessment proceedings, the fact that the Respondent had entered into a Development Agreement (DA) and had received advances was very much within the knowledge of the Assessing Officer. The Respondent’s tax treatment of offering receipts under development agreement to tax only in the year of registration was then accepted by the jurisdictional assessing officer.
A Bench comprising Chandra Poojari, Accountant Member and Beena Pillai, Judicial Member observed that “In the present search and impugned assessment proceedings no new or hidden fact has come to light. The learned assessing officer has only changed the opinion and has now sought to tax the receipts in the year of receipt as against the year of registration. Thus, the additions in the order are purely based on a change in legal opinion and not on any ‘incriminating material’.”
The Tribunal further added that “The predominant condition for satisfaction under 153C of the Income Tax Act is the incriminating nature of evidence found. Though there has been change in the wordings of the section, the intention behind the section is not changed and the presence of document or evidence with incriminating nature is necessary before a notice u/s. 153C of the Income Tax Act is issued.”
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