Income Tax Act | Documents Seized From Actor Yash's Residence Make Him 'Searched Person': Karnataka High Court
The Karnataka High Court has held that the search conducted at Actor Yash's residence makes him a 'searched person' under the Income Tax Act, as documents were seized from him, during the search and a panchanama was drawn. Hence, the order under Section 153C of the Act, which applies to persons other than the one originally searched, is without jurisdiction. Section 153C of the...
The Karnataka High Court has held that the search conducted at Actor Yash's residence makes him a 'searched person' under the Income Tax Act, as documents were seized from him, during the search and a panchanama was drawn. Hence, the order under Section 153C of the Act, which applies to persons other than the one originally searched, is without jurisdiction.
Section 153C of the Income Tax Act, 1961 allows the Income Tax Department to assess or reassess the income of a person other than the one originally searched (a “third party”).
This provision applies when, during a search or seizure operation against one person, the Assessing Officer (AO) finds assets or documents that belong to or relate to a different individual or entity.
Justice S.R. Krishna Kumar opined that the actor was searched and in the light of the undisputed fact that his premises was searched and documents seized from him and a panchanama was drawn, the sole/unmistakable conclusion/inference that can be arrived at from the material on record is that the actor was a searched person and not a non-searched person / such other person as contemplated under Section 153C of the I.T. Act.
In the case at hand, the department obtained a warrant of authorisation under Section 132 of the Income Tax Act and Rule 112 of the Income Tax Rules in relation to one Sri Vijay Kumar Thimmegowda and M/s. Hombale Construction and Estates Pvt. Ltd., and in respect of the residential premises of Naveen Kumar Gowda, popularly known as Yash.
The department issued notices under Section 153C of the Income Tax Act to the assessee.
After that, the department passed the assessment orders for the assessment years 2013-14 to 2018-19, under Section 153C of the Income Tax Act.
The counsel for the assessee referred to the case C.R. Ram Mohan Raju vs. The Deputy Commissioner of Income Tax in W.P. No. 33057 of 2024, where it was held that,
“……Section 153C is in pari materia with Section 158BD, conferring jurisdiction over third parties to a search, providing certain conditions before the Assessing Officer having jurisdiction over a third party can assume jurisdiction. Materials such as books of account, documents or valuable assets found during a search should belong to a third party, which would lead to an inference of undisclosed income of such third party. Such an inference should be recorded by the Assessing Officer having jurisdiction over the searched persons and communicated to the Assessing Officer having jurisdiction over such third party, along with the seized documents and other incriminating materials on the basis of which the Assessing Officer having jurisdiction over such third party would issue notice under Section 153C. On receipt of the aforesaid material, the Assessing Officer having jurisdiction over such third party would proceed against the said third party. Thus, where no material belonging to a third party is found during a search, but only an inference of an undisclosed income is drawn during the course of enquiry, during search or during post-search enquiry, Section 153C would have no application. Thus, the detection of incriminating material leading to an inference of undisclosed income is a sine qua non for invocation of Section 153C of the Act……
The revenue submitted that the search warrant was issued to search Vijay Kumar Thimmegowda and M/s. Hombale Construction and Estates Pvt. Ltd., which was the searched person and merely because a search was conducted in the premises of the assessee, he cannot be construed or treated as a searched person, but had to be considered as a non-searched person/ such other person as contemplated under Section 153C of the I.T. Act.
The bench agreed with the assessee that the issue in the case is covered by the decision of the Karnataka High Court in C.R. Ram Mohan Raju vs. The Deputy Commissioner of Income Tax.
The bench further opined that Section 153C would neither be applicable nor invocable as against the assessee/petitioner, who was a searched person to whom this provision would not apply and the impugned notices as well as orders being illegal, arbitrary and without jurisdiction or authority of law, and all further proceedings pursuant thereto deserve to be quashed.
In view of the above, the bench allowed the petition.
Case Title: Mr. Yash v. Deputy Commissioner of Income Tax
Case Number: WRIT PETITION NO. 6530 OF 2021 (T-RES)
Counsel for Petitioner/Assessee: A. Mahesh Chowdhary and Krishika Vaishnav
Counsel for Respondent/Department: Ravi Raj Y V