Gujarat H.C : Condition precedent for issuing notice under section 153C and assessing or reassessing income of ‘such other person’ is that money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned should belong to such person

High Court Of Gujarat

Vijaybhai N. Chandrani vs. ACIT

Assessment Year : 2001-02 To 2006-07

Section : 153C

D.A. Mehta And Ms. H.N. Devani, JJ.

Special Civil Appln. No. 13787 Of 2009

March 30, 2010

JUDGMENT

Ms. H.N. Devani, J.—Considering the controversy involved in the present petition, by consent of the learned advocates for the parties, the matter is taken up for final hearing today. Hence, rule. Learned advocate for the respondent is directed to waive service of rule.

2. This petition under Art. 226 of the Constitution of India challenges notices dt. 7th Oct., 2009 issued by the respondent under s. 153C of the IT Act, 1961 (the Act) directing the petitioner to furnish the return of income under s. 153C for the asst. yrs. 2001-02 to 2006-07.

3. The petitioner, an individual, purchased a plot of land in one Samutkarsh Co-operative Housing Society being developed by one Savvy Infrastructure Ltd. It appears that a search came to be conducted under s. 132 of the Act at the premises of the said Samutkarsh Co-operative Housing Society as well as at the office of the builder—Savvy Infrastructure Ltd. in the year 2008. Subsequently, on the basis that certain documents pertaining to the petitioner have been found and seized during the search, the impugned notices came to be issued against the petitioner for assessing the petitioner’s income for six assessment years preceding the assessment year relevant to the previous year in which the search was conducted i.e., from asst. yrs. 2001-02 to 2006-07.

4. Vide letter dt. 11th Nov., 2009, the petitioner requested the respondent to provide copies of the seized material and also asked for an extension to file the return. The respondent supplied copies of three loose sheets of paper which, according to the petitioner, do not belong to him. It is in these circumstances that the petitioner has moved the present petition challenging the aforesaid notices.

5. Mrs. Swati Soparkar, learned advocate for the petitioner has invited attention to the provisions of s. 153C of the Act to submit that notice under the said provision can be issued only when the AO is satisfied that any money, bullion, jewellery 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 in whose case a search has been initiated under s. 132. It is submitted that it is an admitted position that the three loose papers found at the time of the search do not belong to the petitioner; that the impugned notice itself states that the proceedings have been initiated on the basis of documents which pertain to the petitioner. It is contended that in the circumstances, it is not open to the respondent to issue the impugned notices for reassessing the petitioner’s income under the provisions of s. 153C of the Act.

6. Mr. M.R. Bhatt, learned senior advocate for the respondent has invited attention to the averments made in the affidavit-in-reply dt. 22nd Feb., 2010 made by the respondent and has placed reliance upon the same.

7. A perusal of the impugned notices dt. 7th Oct., 2009 indicates that a search was conducted under s. 132 of the Act at the premises of Samutkarsh Co-operative Housing Society and Savvy Infrastructure Ltd., Ahmedabad. During the course of search, certain documents pertaining to the petitioner were also found and seized. It is on the basis of these documents that notices under s. 153C have been issued against the petitioner. The petitioner has also annexed copies of the three loose papers which form the basis for issuance of the notice under s. 153C at Annex. ‘C’ to the petition. A perusal of the said documents indicates that the same contain details of members of Samutkarsh Co-operative Housing Society. The said document undoubtedly is not a document which belongs to the petitioner though there is a reference to the petitioner in one of the loose papers under the heading ‘Samutkarsh members detail’ indicating plot numbers, names of members and other details.

8. Vide s. 65 of the Finance Act, 2003 three new sections viz. 153A, 153B and 153C came to be inserted after s. 153 of the IT Act, w.e.f. the 1st day of June, 2003. The said three sections fall under the heading ‘Assessment in case of search or requisition’.

9. Sec. 153A which provides for assessment in case of search or requisition reads thus :

“Notwithstanding anything contained in s. 139, s. 147, s. 148, s. 149, s. 151 and s. 153, in the case of a person where a search is initiated under s. 132 or books of account, other documents or any assets are requisitioned under s. 132A after the 31st day of May, 2003, the AO shall—

(a)issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in cl. (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under s. 139;

(b)assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made :

Provided that the AO shall assess or reassess the total income in respect of each assessment year falling within such six assessment years :

Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this section pending on the date of initiation of the search under s. 132 or making of requisition under s. 132A, as the case may be, shall abate.

Explanation—For the removal of doubts, it is hereby declared that,—

(i)save as otherwise provided in this section, s. 153B and s. 153C, all other provisions of this Act shall apply to the assessment made under this section;

(ii)in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year.”

10. Sec. 153B provides for time-limit for completion of assessment under s. 153A.

11. The controversy in issue pertains to the interpretation of the provisions of s. 153C of the Act which reads thus :

“153C. Assessment of income of any other person—Notwithstanding anything contained in s. 139, s. 147, s. 148, s. 149, s. 151 and s. 153, where the AO is satisfied that any money, bullion, jewellery 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 s. 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the AO having jurisdiction over such other person and that AO shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of s. 153A.”

12. On a plain reading of the aforesaid provisions it is apparent that ss. 153A, 153B and 153C lay down a scheme for assessment in case of search and requisition. Sec. 153A deals with procedure for issuance of notice and assessment or reassessment in case of the person where a search is initiated under s. 132 or books of account, other documents or assets are requisitioned under s. 132A after the 31st day of May, 2003. Sec. 153B lays down the time-limit for completion of assessment under s. 153A. Sec. 153C which is similarly worded to s. 158BD of the Act, provides that where the AO is satisfied that any money, bullion, jewellery 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 s. 153A he shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person. However, there is a distinction between the two provisions in as much as under s. 153C notice can be issued only where the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong to such other person, whereas under s. 158BD if the AO is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under s. 132 or whose books of account or other documents or assets were requisitioned under s. 132A, he shall proceed against such other person under s. 158BC.

13. Thus a condition precedent for issuing notice under s. 153C and assessing or reassessing income of such other person, is that the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned should belong to such person. If the said requirement is not satisfied, resort cannot be had to the provisions of s. 153C of the Act.

14. Examining the facts of the present case in the light of the aforesaid statutory scheme, it is an admitted position as emerging from the record of the case, that the documents in question, namely the three loose papers recovered during the search proceedings do not belong to the petitioner. It may be that there is a reference to the petitioner in as much as his name is reflected in the list under the heading ‘Samutkarsh members details’ and certain details are given under different columns against the name of the petitioner along with other members, however, it is nobody’s case that the said documents belong to the petitioner. It is not even the case of Revenue that the said three documents are in the handwriting of the petitioner. In the circumstances, when the condition precedent for issuance of notice is not fulfilled any action taken under s. 153C of the Act stands vitiated.

15. For the foregoing reasons, the petition succeeds and is accordingly allowed. The impugned notices dt. 7th Oct., 2009 issued by the respondent under s. 153C of the Act are hereby quashed and set aside. Rule is made absolute accordingly with no order as to costs.

[Citation : 333 ITR 436]

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