ITAT Delhi decides a case on when does assumption of jurisdiction under section 153C apply
Case Name: DCIT v. Prominent Realtech (Clubbed with Sunway Realtech)
Assessee Lawyer: K Sampath
Related Section: 153C
- AO conducted search and seizure on the premises of Triveni Infrastructure Development Co. Ltd. (“TIDCL”) and found assessee’s balance sheets therein.
- It found out that assessee, in AY 2008-09, had bought from TIDCL certain shares of two companies at a discount of 85%-90% on the price that TIDCL had paid for buying those shares just about 5 days before the date of the transaction with the Assessee.
- Given the huge difference in purchase and sale prices of these shares as described above, the AO presumed that amounts were paid outside the books of accounts.
- The AO in its assessment order, held that the assessee has paid sale consideration to TIDCL outside the books of accounts and added a sum of INR 9,70,40,500 (which was the difference between the amount paid by TIDCL for purchasing the shares and the amount paid by the assessee to buy the same shares from TIDCL) to the income of the assessee.
- The assessee challenged this order before the CIT(A) on the grounds of a) AO’s assumption of jurisdiction under Section 153C; and b) on merits, challenging the addition of INR 9,70,40,500.
- The CIT(A) rejected the ground pertaining to jurisdiction but accepted assessee’s contention regarding deletion of the given amount.
- CIT(A) ordered deletion of INR 9,70,40,500 and directed an investigation into the matter by the AO.
- Revenue hence, appealed against the CIT(A) against the order of deletion.
- A cross-objection challenging AO’s jurisdiction under Section 153C was also filed by the assessee.
- Sale consideration paid by the assessee to TIDCL much lesser than original consideration hence amounts presumed to be paid outside the books of accounts.
- Assessee’s balance sheet found in the search and seizure shows that it falls under persons other than those included under section 153A, hence AO assumed jurisdiction.
- No incriminating material which not belonging to TIDC was found during the search and seizure operation at TIDC’s premises which showed that amounts were paid by the assessee outside books of account.
- The balance sheet of the assessee found during search and seizure at TIDC’s premises cannot be called incriminating material as such material was already in the public domain.
- In AY 2011-12, Assessee further sold these shares at lower prices and AO accepted the same.
- The case relied on Commissioner of Income Tax vs., Sinhgad Technical Education Society, Commissioner of Income Tax vs., Radhey Shyam Bansal and Amity Hotels Pvt. Ltd v. CIT.
- In order to attract section 153C, Revenue has to demonstrate that during the search, it has found some material which ‘belongs to’ a person other than against whom a search has been conducted. The balance sheet of a company that has been already filed and that is already in possession of IT authorities cannot be described as such a document. Hence, the AO acted outside his jurisdiction.
- Even on merit, no evidence on record to show that amounts were paid outside the books of accounts. Additions could not be made merely on the presumption of AO. AO cannot, on one hand, accept the price received by the assessee on account of the onward sale in AY 2011-12 and, on the other hand, continue to challenge the price paid in AY 2008-09.
- In ACIT, Gwalior v. Global Estate, assumption of jurisdiction under Section 153C was quashed on grounds of insufficient evidence produced by the AO. The current case is legally at the same footing.
- Tribunal quashed the assumption of jurisdiction by the AO and set aside the CIT(A)’s order.
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