Income Tax Appellate Tribunal - Bangalore
P. Srinivas Naik vs Asstt. Cit on 27 November, 2007
Equivalent citations: (2008)114TTJ(BANG)856
ORDER
N.L. Kalra, A.M.
1. The assessee has filed the appeals against the common order of learned Commissioner (Appeals)-VI, Bangalore, dated 15-6-2007. Since, the grounds of appeal are the same, therefore, these appeals are being disposed of by a single consolidated order.
2. A search under Section 132 was conducted on the business/residential premises of Shri L. Sambashiva Reddy, who is the managing director of M/s Saravana Construction (P) Ltd., Bangalore. During the course of search, certain documents showing receipt of huge cash loans, repayment of cash loans and payment of interest on these loans to various parties were found and seized. Shri P. Srinivas Nayak, the assessee also advanced loan to M/s Saravana Construction (P) Ltd. during the period 1-4-1997 to 31-3-2004. The assessing officer has referred to the seized material which indicated the names of the persons who has given cash loan with dates on right hand side, repayment of cash loan by way of installment on the left hand side and interest paid to these parties. The assessee confirmed that he has given cash loans to Shri L. Sambashiva Reddy. Before the Assistant Commissioner, the assessee stated that loans were given out of funds belonging to the trust namely M/s Pushpa Family Foundation Trust. The assessing officer issued a notice under Section 153C read with Section 153A on 3-11-2005. No return was filed in response to that notice. Notices under Section 142(1) were issued during the pendency of the proceedings. The assessee filed the return of income disclosing an income of Rs. 1,14,040 for the assessment year 1998-99. The assessing officer has completed the assessment under Section 143(3) read with Section 153A of the Income Tax Act. The assessee filed an appeal before the learned Commissioner (Appeals). Before the learned Commissioner (Appeals), it was submitted that the learned assessing officer was not justified in making the additions. A general ground of appeal was taken that the order of the assessing officer is opposed to law, equity weight of evidence etc. The learned Commissioner (Appeals) decided the issues on merits.
3. Before us, a specific ground has been taken that the assessee denies himself liable to be assessed under Section 143(3) read with Section 153C of the Income Tax Act. The assessee has also raised ground of appeal that search initiated in the case of Shri L. Sambashiva Reddy is without jurisdiction. It is being consistently held by the Tribunal that the Tribunal has no jurisdiction to adjudicate upon the legality of the search. Moreover, the search has not taken place on the business or residential premises of the assessee and, therefore, he has no right to challenge the search initiated in the case of Shri L. Sambashiva Reddy. Hence, the ground of appeal, relating to the challenge of search in the case of L. Sambashiva Reddy is dismissed.
4. If the search is initiated under Section 132(1) of the Income Tax Act, then the assessing officer has to issue notice to such person to furnish the return of income in respect of each assessment year falling within six assessment years referred to in Clause (b) of Section 153A. Section 153C provides that where the assessing officer is satisfied any money, bullion, jewellery or other valuable article or thing or books of account or documents seized belong to a person other than the person referred under Section 153A, then proceedings under Section 153A are to be taken against such other person. During the course of proceedings before us, the learned Authorised Representative argued that proceedings under Section 153C can be initiated against other person if the money, bullion, jewellery or other valuable article or thing or books of account or documents seized belong to other person. In the instant case, books of account or documents belong to the person, in whose case, search was initiated. Such books of account or documents do not belong to the assessee. It was, therefore, argued that assessing officer was not justified in initiating proceedings against the assessee under Section 153C of the Income Tax Act.
5. On the other hand, the learned Departmental Representative submitted that entries in the books of account showed the receipt of loans from the assessee. Such entries are valuable entries and belonging to the assessee. Hence, the assessing officer was justified in initiating the proceedings under Section 153A read with Section 153C of the Income Tax Act.
6. During the course of proceedings before us, the learned Departmental Representative has submitted the following submissions:
It may be seen that the assessee has raised issue regarding validity of assessment completed under Section 153C of the Act. By virtue of insertion of new Sections 153A, 153B and 153C of the Income Tax Act, w.e.f 1-6-2003, assessment of the income of any other person is assessable under Section 153C of the Act. The new Section 153C provides that where an assessing officer is satisfied that any money, bullion, jewellery or other valuable articles or thing or books of account or documents seized or requisitioned belong or belongs to a person other than the person referred to in Section 153A then the books of account or documents or assets seized or requisitioned shall be handed over to the assessing officer having jurisdiction over such other person and that assessing officer shall proceed against such other person and issue such other person notice and assess or reassess income of such other person in accordance with provision of Section 153A.
From perusal of the record, it is noticed that search action under Section 132 was conducted in the business as well as residential premises of Shri L. Sambashiva Reddy, who is the managing director of M/s Sarvana Construction (P) Ltd., Bangalore. During the course of search incriminating documents found and seized indicate the names of the persons including Shri P. Shrinivas Nayak (the assessee) who have given the cash loan with dates, repayment of cash loan and the interest payment made to the parties. It was found that transaction relating to Shri P. Shrinivas Nayak entered in the books of account of M/s Saravana Construction (P) Ltd. which did not disclosed by the assessee. No books of account or assets belongs to the assessee was seized. Subsequently, the assessing officer had completed assessment under Section 143(3) read with Section 153A of the Income Tax Act for assessment years 1998-99 to 2004-05 and addition made by the assessing officer was confirmed by the Commissioner (Appeals) vide order ITA No. 77 to 83/Assistant Commissioner, CC-I (2)/ Bangalore/Commissioner (Appeals)-VI/2006-07, dated 15-6-2007.
The assessee relied on the decision of Hon'ble Supreme Court in the case of Union of India v. Ajit Jai and Ors. is not applicable in this case, as there was a valid search in the case of Shri L. Sambashiva Reddy and consequent upon to the search operation, department has detected undisclosed income of the persons including the assessee. Accordingly, the jurisdictional assessing officer has completed assessments.
No arguments is being submitted for ground No. 1(e) as the substantial question of law was raised in ground Nos. 1(c) and 1(d).
In the fact and circumstances of the case, the Hon'ble Bench is requested to issue their finding/direction in this case, since question of law arose first time with reference to the new provision of Section 153C of the Act.
7. We have heard both the parties. It is an undisputed fact that books of account or documents do not belong to the assessee, as these were seized from the premises of Shri Reddy. It is nowhere stated that these books of account or documents showed that all the transactions belonging to the assessee. Such books of account or documents contained the transactions relating to the group concerns of Shri Reddy. No valuable belonging to the assessee has been seized during the course of search. The term belonging implied something more than the idea of casual association. It involves the notion of continuity and indicates one more or less intimate connection with the person over a period of time. The books of account or documents seized during the course of search have a close association with the group concern of Shri Reddy. It records the transaction carried out by that group. It does not record the transaction carried out by the assessee. Under Wealth Tax Act, assets belonging to assessee were taxable. The expression belonging to the assessee connotes both the complete ownership and limited ownership of interest. Of course belonging to is capable connoting, interest, which is less than absolute perfect legal title. However, there should be some limited ownership of interest, if it is to be permitted that the assets belong to the assessee. In the instant case, documents or books of account found during the course of search and seized cannot be termed, to be indicating any limited interest of the ownership of the assessee in such books of account or documents. The language used in Section 153C is materially different from the language used under Section 158BD. As per Section 158BD, if any undisclosed income relates to other person, then action against such other person can be taken provided such undisclosed income is referable to the document seized during the course of search. However, Section 153C says that if valuable or books of account or documents belonging to other persons are seized then action under Section 153C can be taken against that person. In the instant case, we are satisfied that books of account or documents do not belong to the assessee and, therefore, the assessing officer was not justified in initiating action under Section 153A read with Section 153C of the Income Tax Act. The assessing officer is free to take proper remedial measure as per law.
In the result, the appeals filed by the assessee are allowed. Since, we are holding that assessing officer was not having jurisdiction to assess under Section 153A read with Section 153C, therefore, we are not deciding the issue on merits, so as to preempt any finding on merits in respect of the issues to be taken by the assessing officer in case recourse is taken for remedial measure if any.