Action Can Be Initiated U/s 153C Based On Seizure Made During Course Of Search And Not Based On Material Impounded In Course Of Survey: Mumbai ITAT

While quashing the proceedings initiated u/s 153C of the Income Tax Act based on the material impounded in course of survey action, the Mumbai ITAT clarified that the material considered for initiating action u/s 153C in the case of assessee was not seized in the course of search action but was impounded in the course of the survey action, and hence assessment u/s 153C is not as per provisions of law.

The Bench of the ITAT comprising of Sandeep Singh Karhail (Judicial Member) and Om Prakash Kant (Accountant Member) observed that “Since, the material to be considered for invoking u/s 153C of the Act should be seized during the course of the search u/s 132 of the Act on searched action or requisitioned u/s 132A of the Act and this being a mandatory condition for invoking action u/s 153C of the Act failure on the part of the Assessing Officer in recording the satisfaction based on any material seized during the course of the search, the action taken u/s 153C of the Act do not meet requirement of law and therefore stand quashed”, added the Bench. (Para 4.3)

As per the brief facts of the case, the Assessee has filed an appeal against the addition made u/s 68. The assessee also challenged the validity of the reassessment proceedings completed u/s 153C.

The Bench noted that the Assessee has challenged the legality of jurisdiction acquired by the AO for invoking proceedings u/s 153C.

The Bench observed that the AO has wrongly mentioned in the satisfaction note that the Annexure was seized but it was impounded during survey u/s 133A.

The Bench observed that as per the provisions of section 153C unless the documents belonging to or on the other person are seized during search action at the premises of the searched person, no proceedings u/s 153C can validly be taken in the course of the other person.

The Bench stated while referring to the decision of the Supreme Court in the case of Commissioner of Income Tax v. Sinhagad Technical Education Society [2017] 84 taxmann.com 290 (SC) that for invoking section 153C the incriminating material should pertain to assessment years in question whereas in the case the incriminating material has not even seized during the search action.

The Bench further stated that the issue was considering any other material or information available and relatable to such evidence during the assessment u/s 158BB/158BC.

Therefore, on finding that the action of reassessment was not as per the provision of law, ITAT allowed the assessee's appeal.

Counsel for Appellant/Taxpayer: Rasesh Shah

Counsel for Respondent/Department: Sanyogita Nagpal

Case Title: Dinesh Shah (HUF) verses Dy. CIT

Case Number: ITA No. 1150/MUM/2020

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