No S.153C Income Tax Assessment if Documents only ‘Pertain to’ and do Not ‘Belong to’ Assessee: ITAT Deletes ₹85L Addition [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has quashed an aggregate tax addition of ₹85.88 lakh, observing that the proceedings under Section 153C of the Income Tax Act, 1961 were initiated on the basis of documents that merely “pertained to” the assessees, but did not “belong to” them.

A search and seizure operation was carried out by the Income Tax Department at the premises of the Navneet Dawar Group.

During the course of this search, certain documents suggesting unaccounted property transactions were allegedly recovered. The Department was of the view that these documents belonged to Rachita Sahgal & Vivek Sahgal, and proceeded to make additions of ₹42,94,000 each in each of their assessment orders for Assessment Year 2018–19, by invoking Section 153C.

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Rachita Sahgal and Vivek Sahgal contested the matter before the Tribunal but failed to appear in person or through counsel before ITAT but placed their contentions on record through written pleadings.

Meanwhile Baljeet Kaur appeared for the Revenue and reiterated the Department's stand that the seized documents substantiated the additions and justified initiation of proceedings under Section 153C of the Income Tax Act, 1961.

The Bench of Judicial Member Satbeer Singh Godara and Accountant Member S. Rifaur Rahman proceeded to decide the matter ex-parte and observed that the foundational requirement of Section 153C changed post an amendment in 2015.

ITAT noted that clause (a) was regarding money, bullion, jewellery or other valuable article or thing, seized or requisitioned, “belonging to” the assessee; while, clause (b) applied to books of account or documents, seized or requisitioned that merely “pertains to” or “relates to” the assessee.

Since the documents in question only “pertained to” the assessees and were not in their ownership, the requisites for invoking Section 153C were not satisfied.

The Bench also rejected the Revenue’s reliance on Section 292C under the Act, which created a presumption regarding seized documents, which would be applicable only against the person from whom the materials are actually found and seized.

In the absence of any corroborative evidence linking the alleged on-money transactions to the income of the assessees, ITAT allowed the appeals and directed deletion of the additions aggregating ₹85.88 lakh.

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