S.153C Of IT Act Restricts Assessment Beyond Documents Considered By AO To Derive Satisfaction Note For Initiating Proceedings On 'Other Person': Delhi HC
The Delhi High Court has answered in the affirmative the question whether Section 153C of the Income Tax Act, 1961 restricts an assessing officer from enquiring beyond the documents considered for deriving satisfaction note for initiating assessment/ re-assessment of the 'other person'. Section 153C contains a special provision relating to assessment of 'other person', pursuant...
The Delhi High Court has answered in the affirmative the question whether Section 153C of the Income Tax Act, 1961 restricts an assessing officer from enquiring beyond the documents considered for deriving satisfaction note for initiating assessment/ re-assessment of the 'other person'.
Section 153C contains a special provision relating to assessment of 'other person', pursuant to material found during the search operations conducted under Section 132 on any person or as a result of requisition made under Section 132A of the Act.
It empowers the Assessing Officer of the person searched, to handover records of undisclosed assets belonging to the other person (found in the books of account of the searched person), to the Assessing Officer of that other person. The Assessing Officer of that other person, “if satisfied”, is empowered to proceed against such other person for evading tax on such undisclosed income.
In the case at hand, proceedings under Section 153C were initiated against the Respondent- TDI Infrastructure, pursuant to search operations on Taneja-Puri Group.
Significant to note that original return for the relevant assessment year was filed by the Respondent declaring total income of Rs. 46,99,13,140/-. However, after a notice under Section 153C, Assessee made additional claims of brokerage paid and interest charged by it, which was not claimed earlier.
By virtue of Assessment Order under Section 153C, the Assessing Officer disallowed the said brokerage and interest expenses, and made certain additions.
This order came to be reversed by the ITAT on the ground that additions were made on the basis of survey proceedings and the seized documents recorded in the satisfaction note did not belong to the Respondent. Hence, this appeal.
The Revenue contended that seized documents even if 'pertaining' or containing information that 'relates' to the assessee, is sufficient.
The division bench of Justices Yashwant Varma and Ravinder Dudeja however disagreed. It cited Pr. CIT v. Dreamcity Buildwell (P) Ltd. (2019) where the High Court had held that the onus was on the Revenue to show that the incriminating material, documents recovered at the time of search 'belongs' to the Assessee. It was further held that it is not enough for the Revenue to show that the documents either 'pertain' to the Assessee or contains information that 'relates to' the Assessee.
The High Court also agreed with the ITAT's observations that none of the additions were based on the 'satisfaction note' issued for initiating proceedings under Section 153C.
“None of the additions made in the impugned assessment orders are based on any seized/incriminating material either found during the course of search or has been recorded in the 'satisfaction note' by the Assessing Officer, and therefore, none of these additions can be made in the proceedings u/s. 153C.”
It cited CIT v. Kabul Chawla (2015) where the High Court had held that if no incriminating material is found during the course of the search in respect of an issue, then no addition in respect of such an issue can be made in the assessment under Sections 153A and 153C of the Act.
Accordingly, Revenue's appeal was dismissed.
Appearance: SSC Gaurav Gupta with JSCs Shivendra Singh and Yojit Pareek for Revenue; Senior Advocate Salil Aggarwal with Advocates Uma Shankar and Mahir Aggarwal for Respondent
Case title: Pr. Commissioner Of Income Tax (Central)-3 v. M/S TDI Infrastructure Ltd
Case no.: ITA 494/2022