Madras H.C : Where there is no seized material with investigating officials in case of searched person, assumption of jurisdiction under section 153C in assessee’s case is not valid

High Court Of Madras

CIT vs. Late J. Chandrasekar (HUF)

Section : 153C

Mrs. Chitra Venkataraman And P. P. S. Janarthana Raja, JJ.

T.C.(A) Nos. 159 To 161 Of 2011 And M.P. Nos. 1 And 1 Of 2011

April 26, 2011

JUDGMENT

Mrs. Chitra Venkataraman, J. – As against the order of the Tribunal, the Revenue is on appeal. It is seen from the order of the Tribunal that on the search conducted in the case of H. Anraj and group on November 25, 2003, materials pertaining to “on-money” payment paid to the assessee in respect of property purchased from the assessee were seized. Based on that, the Assessing Officer issued a notice under section 153C of the Income-tax Act, 1961. In the assessment, the Assessing Officer adopted the sale consideration at Rs. 24,50,000 as against Rs. 15 lakhs adopted and the fair market value as on April 1, 1981, was adopted at Rs. 300 per cent. as against Rs. 5,000 per cent. as claimed by the assessee and reworked the capital gains. Aggrieved by the same, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) held that there was no valid assumption of jurisdiction under section 153C of the Act when the entire assessment was made, without the support of the seized materials to touch on the assessment of the assessee.

2. The Commissioner of Income-tax (Appeals) held that having regard to the fact that the Assessing Officer did not have the seized materials while taking up the assessment under section 153C of the Act the assessment suffered the total lack of jurisdiction. Consequently, any decision on the merits of the assessment with reference to the sale consideration would be an academic exercise only. Thus, the Commissioner of Income-tax (Appeals) allowed the appeal by holding that there was no valid assumption of jurisdiction under section 153C of the Act. There was no application of mind by the Assessing Officer and consequently he cancelled the entire assessment. Aggrieved by the same, the Revenue went on appeal before the Tribunal, In paragraph 6 of the order, the Tribunal pointed out that the Assessing officer issued the notice under section 153C of the Act on the basis of the communication dated December 29, 2004, from the DDIT (Inv.). Further, a perusal of the record revealed that the Assessing Officer issued the notice without having the seized material and that the same were not handed over to him by the investigating team or to the Assessing Officer having jurisdiction over the persons searched during which the material was seized. Although steps were taken by the Assessing Officer in addressing letters to the DDIT seeking the seized materials, the same were not furnished. It is further pointed out in the order of the Tribunal that the Assessing Officer took steps to secure the seized materials only when the assessee sought for inspection of the material. Thus, the Tribunal came to the conclusion that in the absence of the seized materials obtained from the investigating officials the assumption of jurisdiction under auction 153C of the Act is wholly unsustainable and, hence, the entire proceedings had to be set aside. Quite apart from the jurisdiction, the Tribunal also went into the merits of the case and ultimately held that no direction could be issued as regards capital gains working in the absence of valid assumption of jurisdiction. Aggrieved by the same, the Revenue has come forward with the above tax case appeals.

3. Learned standing counsel for the appellant pointed out that when there are sufficient materials available in the files that the seized materials were placed before the Assessing Officer while issuing notice under section 153C of the Income-tax Act, 1961, the Tribunal committed a serious error in holding that the seized materials were not available with the Assessing Officer while issuing the notice under section 153C of the Act. Further, the Tribunal committed an error in deciding the jurisdictional issue when the assessee participated in the assessment proceedings without challenging the jurisdiction.

4. As already pointed out, the order of the Commissioner of Income-tax (Appeals) gives the details of proceedings before the officer concerned who issued the notice under section 153C of the Act, which clearly says that the seized materials were not available at the hands of the Assessing Officer before issuing the notice under section 153C of the Act. Even after the notice was issued, there were hardly any material to enable the officer for valid assumption of jurisdiction.

5. In the light of the fact that the Revenue did not produce any material to show that the materials were available at the hands of the Assessing Officer at the time of issuing notice, rightly the Tribunal came to the conclusion that the assumption of jurisdiction goes against the very tenor of section 153C of the Act. Consequently, the appeal had to fail.

6. Even though the learned standing counsel for the appellant strenuously contended that the files were available in the office of the Assessing Officer, yet, there is hardly any material to show that the contention taken by the learned standing counsel before this court can be substantiated or was substantiated before the Tribunal.

7. Being a pure question of fact that the Income-tax Officer did not have the benefit of the seized materials while issuing the notice under section 153C of the Act, we have no hesitation in confirming the order of the Tribunal that there was no valid assumption of jurisdiction in the proceedings. Consequently, the above tax case appeals stand dismissed at the admission stage itself. No costs. Consequently, connected MPs are also dismissed.

[Citation : 338 ITR 61]

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