1 Section 153C – AO cannot assume jurisdiction u/s. 153C on the basis of loose paper, seized in the course of search on a person (other than the assessee), which loose paper neither makes any reference to the assessee company, nor of any transaction entered into by the assessee. Amendment made by the Finance Act, 2015 to section 153C is prospective and is applicable w.e.f. 1.6.2015.

DCIT vs. National Standard India Ltd.

ITA Nos. 4055 to 4060 (Mum.) of 2015

A.Ys.: 2005-06 to 2010-11,  Date of Order: 28^th July, 2017

FACTS

The management of the assessee company
changed in May 2010 and consequently, the assessee company became a part of
Lodha Group of companies. At the time of search on Lodha Group of entities on
10.1.2011, premises of the assessee company at Wagle Estate, where the project
of Lodha Group viz. Lodha Excellencia was coming up, was covered u/s.
133A. 

In the course of the search, minutes of SCUD
meeting giving details of projects, customers, flats booked by them, area of
the flat, consideration and deviation from the listed price were seized. These
minutes had a remarks column which explained the deviation and indicated in
many cases payment in cash euphemistically referred to as “payment in other
mode”.

Further, in the course of search, Mr.
Abhinandan Lodha, key person of Lodha Group, in his statement recorded u/s.
132(4) of the Act, came up with a disclosure of Rs. 199.80 crore and offered
the same as additional income.  From the
entity wise details of unaccounted income, furnished by Mr. Lodha, it was found
that it included Rs. 110.25 lakh in respect of sale of parking space in the
hands of assessee company in AY 2011-12.

The Assessing Officer, based on these
minutes and the statement recorded u/s.132(4), assumed jurisdiction u/s.153C of
the Act and issued a notice requiring the assessee to furnish return of income.

Vide order dated 31.3.2013 passed u/s.153A
r.w.s. 153C/143(3) the Assessing Officer (AO) assessed the loss to be Rs.
6,40,575 as against the returned loss of Rs. 3,62,51,460.

Aggrieved, the assessee preferred an appeal
to the CIT(A) who observed that the seized document on the basis of which the
AO assumed jurisdiction u/s. 153C of the Act indicated the modus operandi
of the Lodha Group of receiving money, but did not make any reference to any
project of the assessee. It also did not bear any reference to the transactions
entered into by the assessee. The CIT(A) held that the AO had wrongly assumed
jurisdiction u/s. 153C of the Act. Accordingly, he quashed the assessment
framed by the AO u/s. 153A r.w.s. 153C/143(3) of the Act.

Aggrieved, the Revenue preferred an appeal
to the Tribunal.

HELD

A reference to the provisions of section
153C of the Act reveals beyond any doubt that upto 30^th May, 2015,
the requirement, as per mandate of law, for the purpose of assumption of
jurisdiction u/s. 153C was that the AO of the person searched should be
satisfied that money, bullion, jewellery or other valuable article or thing or
books of accounts or documents seized `belonged’ to a person other than the
person referred to in section 153A. Section 153C excludes from its scope and
gamut such seized documents which though were found to pertain or relatable to
such `other person’, but however not found to be `belonging’ to the latter.

The legislature realising the fact that the
usage of the aforesaid terms seriously jeopardised the assumption of
jurisdiction by the AO in a case where any `books of account’ or `documents’
which though pertained to or any information contained therein related to such
other person, but were not found to be `belonging’ to him, amended the
provisions of section 153C, by the Finance Act, 2015, with effect from 1.6.2015
and dispensed with the terms `belongs’ or `belong to’ and instead included
within its sweep books of account or documents which pertain or pertains to or
any information contained therein, relates to such other person.

The Tribunal held that the aforesaid
amendment to section 153C is not retrospective in nature and is applicable only
w.e.f. 1.6.2015. This observation stands fortified by the judgment of the Bombay
High Court in the case of CIT vs. Arpit Land (P.) Ltd. [2017] 393 ITR 276
(Bom.). It held that the case of the assessee would be governed by the
pre-amended law as was applicable upto 30.6.2015.

It observed that a bare perusal of the
seized documents does neither make any reference of the assessee company, nor
of any transaction entered into by the assessee company, which could go to
justify the assumption of jurisdiction by the AO u/s. 153C.

The Tribunal held that in the absence of any
document belonging to the assessee having been seized during the course of
search proceedings in the case of Lodha Group, the assumption of jurisdiction
by the AO u/s. 153C by referring to the above referred seized documents is
highly misplaced.

It also observed that the statement of Shri
Abhinandan Lodha recorded u/s. 132(4) in the course of search and seizure
proceedings conducted in the case of Lodha group cannot be construed as a
`seized document’, therefore, the reliance placed by the AO on the same to
justify the validity of jurisdiction assumed u/s. 153C in the hands of the
assessee company, cannot be accepted.

The Tribunal held that the AO had clearly
traversed beyond the scope of his jurisdiction u/s. 153C and therein proceeded
with and framed assessment u/s. 153A r.w.s. 153C/143(3) in the hands of the
assessee company.

The Tribunal upheld the order of CIT(A) and
dismissed the appeal filed by the revenue.