By TIOL News Service

MUMBAI, JUNE 24, 2014: THE issue before the Bench is - Whether the provisions of Sec 153C allow the AO to invoke it casually and need not record any satisfaction. And the answer goes against the Revenue.

Facts of the case

The assessee is a company. Before High Court, the Revenue's counsel had submitted that section 153C had been brought on the statute book so as to enable assessment of the income of any other person. It was submitted that this section opens with a nonobstante clause and enables AO to proceed and assess the income of any other person. It was submitted that whenever the AO was satisfied that any money, bullion, jewelery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A then, such seized documents or assets and equally requisitioned shall be handed over to AO, having jurisdiction over such other person. It was further submitted that this section mandates that AO must proceed to issue notices and assess or reassess the income of such other person in accordance with the provisions of section 153A. It was further submitted that there was nothing in the language of subsection (2) which would in any manner require AO to hold that the seizure of a document was permissible only if it was incriminating. There was no discretion but the Jurisdictional AO had to issue the requisite notice was the submission. It was further submitted that the findings recorded by the Tribunal render the provisions of section 153C totally redundant. The criticism by the Tribunal of the parliamentary provisions and the approach of the Department was therefore completely uncalled for. The finding of the Tribunal would raise a substantial question of law.

On the other hand, assessee's counsel had submitted that this appeal does not involve any substantial question of law, much less, the questions projected as such before us. It was submitted that the Tribunal had rendered factual findings. The Tribunal had found that the reason for issuance of notice u/s 153C was for applicability of the provisions of section 45(4). That issue was already examined and no addition was found necessary u/s 146(3) after scrutiny. Therefore, the documents do not have any incriminating material relevant for the AY year in question. Thus, the Tribunal observed that in the absence of any incriminating material, the proceedings u/s 146(3) could not have been initiated. It was therefore submitted that the finding cannot be read in isolation but must be read in the backdrop of the stand of the Department already noted. Thus, it was submitted that the view taken was imminently possible and based on the facts and circumstances peculiar to the Assessee's case. It was submitted that the appeal deserves to be dismissed as it does not raise any substantial question of law.

Held that,

++ it is apparent that the Tribunal referred to the seized documents. During the course of the proceedings, it was noted that the seized documents referred to a transaction in relation to transferable development rights, for short TDR. The Tribunal found that the TDR was taken over by the retiring partner. In the earlier round, the issued raised was whether this was a capital asset and therefore required to be dealt with in terms of section 45, particularly subsection (4) thereof. The Assessing Officer proceeded to issue requisite notice and in relation to the transaction evidenced by the said documents. The issue of applicability of section 45(4) was considered. It was found that during the very assessment year, no addition was necessary. It is that issue which was sought to be raised once again and relying on the very document, the Revenue has proceeded against the Respondent. It is in that backdrop that the Tribunal found that the seized documents may relate to the TDR that may have been handed over or taken over by retiring partner. However, whether that attracts the provisions of section 45(4) of the Act was an issue that was considered at length and the factual finding is that it being a stock-in-trade of the firm, the provision invoked was not applicable. That is how the Tribunal proceeded and held that merely because the document evidencing the transaction was in possession of the Department, it could not have issued notice to any other person within the meaning of section 153C of the Act particularly so as to reopen the concluded issue. It is in these circumstances that the Tribunal has made the observations in paragraph 25 of the order and which according to Mr Gupta, proceed on an incorrect reading of the section;

++ we are of the view that in the facts peculiar to this case, any larger or wider controversy need not be decided. The Tribunal, as a matter of caution and in the peculiar facts of this case observed that a casual resort to section 153C of the Act is impermissible. There must be some basis for proceeding under section 153C of the Act. The Tribunal referred to the satisfaction which is recorded by the Assessing Officer. It is only thereafter that he can proceed in accordance with the provisions of the said section. We do not see how the observations by themselves raise any substantial question of law. The observations and findings in paragraphs 24 and 25 of the order must be seen as confined and restricted to the facts peculiar to the case of the Respondent – Assessee. These are findings rendered for the purpose of disposal of the Appeal before the Tribunal. Beyond that nothing is held based on which we can entertain this Appeal. Once we have clarified that every single observation and finding in paragraph 25 of the order of the Tribunal must be read in the backdrop of the facts peculiar to the case of the Respondent – Assessee and not laying down any general rule or law so also the controversy based on construction or interpretation of the provisions not being gone into, then, the apprehension of Mr Gupta need not be taken care of any further. We are of the opinion that in the light of our clarification, the apprehension of Mr Gupta has no basis. The Appeal does not raise any substantial question of law. Appeal is accordingly dismissed with no order as to costs.

(See 2014-TIOL-1006-HC-MUM-IT)