The Income Tax Appellate Tribunal (ITAT) Bangalore held that the assessment under Section 153C cannot be based on presumption. The Bench consisted of B R Baskaran, Accountant Member and Beena Pillai, Judicial Member. The appellant was represented by H. Siva Prasad Reddy and the respondent was represented by Shri Sameer Kumar Singh.
The appeal was considered by ITAT as per the directions from The Karnataka High Court. The assessee’s husband (Somashekhar Reddy) was subjected to search under the Income Tax Act and certain documents relating to bills of purchasing jewellery were siezed during the search. The AO is under a duty to record that the satisfaction that the documents do not belong to the searched person and then transfer those documents to the A.O. having jurisdiction over the ‘other person’ to whom the said document belong. The respondents contended the name of the assessee was mentioned and hence the A.O. of the searched person has treated these documents as belonging to the assessee herein and accordingly transferred them to the AO of the assessee herein. Hence the act of A.O. was justified in initiating proceedings u/s 153C of the Act.
The appellants contended that the documents cannot be considered as belonging to ‘some other person’ as contemplated u/s 153C of the Act. The appellant also stated that the AO has not arrived at an objective satisfaction with regard to the documents and in the absence of objective satisfaction as contemplated u/s 153C of the Act, the A.O. could not have initiated proceedings and hence the proceedings initiated by the AO is illegal and is liable to be quashed.
ITAT upheld the contention of the appellant that the A.O. of the searched person Somashekhar Reddy has not come to an objective satisfaction that the impugned documents belong to the assessee herein. Since the proceedings was not initiated under Section 153C the ITAT partly allowed the second appeal filed by the appellants.
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