Search and seizure – Assessment of third person – Sections 132, 132(4) and 153C of ITA, 1961 – Condition precedent – Amendment permitting notice where seized material pertained to assessee as against existing law that required Department to show that seized material belonged to assessee – Amendment applies prospectively – Where search took place prior to date of amendment, Department to prove seized documents belonged to assessee – Statement of search party containing information relating to assessee no document belonging to assessee – AO wrongly assumed jurisdiction u/s 153C

23. Principal
CIT vs. Dreamcity Buildwell P. Ltd.; [2019]
417 ITR 617 (Del.) Date
of order: 9^th August, 2019 A.Y.:
2005-06

Search
and seizure – Assessment of third person – Sections 132, 132(4) and 153C of
ITA, 1961 – Condition precedent – Amendment permitting notice where seized
material pertained to assessee as against existing law that required Department
to show that seized material belonged to assessee – Amendment applies
prospectively – Where search took place prior to date of amendment, Department
to prove seized documents belonged to assessee – Statement of search party
containing information relating to assessee no document belonging to assessee –
AO wrongly assumed jurisdiction u/s 153C

For the
A.Y. 2005-06 the Tribunal set aside the assessment order passed by the AO u/s
153C of the Income-tax Act, 1961 holding that the assumption of jurisdiction
u/s 153C by the AO was not proper. The Tribunal found that two of the documents
referred to, viz., the licence issued to the assessee by the Director, Town and
Country Planning, and the permission granted to the assessee by him for
transferring the licence could not be said to be documents that constituted
incriminating evidence revealing any escapement of income.

On appeal
by the Revenue, the Delhi High Court upheld the decision of the Tribunal and
held as under:

‘(i)      Search and the issuance of notice u/s 153C
pertained to the period prior to 1^st June, 2015 and section 153C as
it stood at that relevant time applied. The change brought about prospectively
w.e.f. 1^st June, 2015 by the amended section 153C(1) did not apply.
Therefore, the onus was on the Department to show that the incriminating material
or documents recovered at the time of search belonged to the assessee. It was
not enough for the Department to show that the documents either pertained to
the assessee or contained information that related to the assessee.

(ii)      The Department had relied on three
documents to justify the assumption of jurisdiction u/s 153C against the
assessee. Two of them, viz., the licence issued to the assessee by the
Director, Town and Country Planning, and the letter issued by him permitting
the assessee to transfer such licence, had no relevance for the purpose of
determining escapement of income of the assessee for the A.Y. 2005-06.
Consequently, even if those two documents could be said to have belonged to the
assessee, they were not documents on the basis of which jurisdiction could be
assumed by the A O u/s 153C.

(iii)      The third document, the statement made by
the search party during the search and survey proceedings, was not a document
that “belonged” to the assessee. While it contained information that “related”
to the assessee, it could not be said to be a document that “belonged” to the
assessee. Therefore, the jurisdictional requirement of section 153C as it stood
at the relevant time was not met. No question of law arose.’