Income Tax, Issue Update

Documents seized during search of a person other than the person against whom assessment proceedings are initiated under section 153A: Basis for passing order under section 153C

Case: Sri Panati Vittalanath Reddy vs. Deputy Commissioner of Income Tax, Central Circle-2(4), Bangalore ITAT

Outcome: Partial


  • The Assessee was engaged in the business of management of Municipal Solid Waste on contract basis with BBMP. A search was conducted at the residential premises of the Assessee under section 32 of the Act on 09.10.2014 on the basis of warrant issued in the case of one Sri P. Gopinath Reddy and others. In this residential premise, the Assessee stayed along with several other family members, as it was a common residence for 19 members of the family of Sri P. Chenga Reddy. During the course of search cash of Rs. 14.80 lakhs was seized apart from jewellery weighing about 1,970 grams. Apart from these valuables, there were no other documents or books of accounts that were seized during the course of search. After completion of the search, the Assessing Officer issued notice under section 153C of the Act on 05.10.2016 calling for the returns of income for the assessment years 2009-10 to 2014-15.

Key Points

  • Unaccounted cash and jewellery were found and seized which was claimed to belong to the Assessee and therefore, the Assessing Officer of the Assessee had rightly recorded the satisfaction based on seized assets and other material for issuance of notice under section 153C of the Act. Further, the seized assets were acquired out of business income and therefore, they could be considered as in the nature of incriminating material. Further, the Commissioner of Income Tax (Appeals) had verified the assessment, recorded the searched person as well as the Assessee, and found that a satisfaction note was duly recorded and the seized cash and jewellery belonged to the Assessee. Therefore, there was a valid satisfaction note available on the file of Assessing Officer. Thus, the Assessing Officer followed the due procedure for initiating the assessment proceedings under section 153C of the Income Tax Act.
  • The Assessing Officer of Sri P Gopinath Reddy had recorded the satisfaction that there was seized cash and jewellery belonging to the Assessee that was found and seized at the time of search and this was handed over to the Assessing Officer of the Assessee. The Assessing Officer of the Assessee had also recorded the satisfaction for the purposes of initiation of proceedings under section 153C. Thus, it was inferred that the Assessing Officer was duty bound to issue notice under section 153C and accordingly, the assessment proceedings initiated were valid.

Share your thoughts using the comment section below

%d bloggers like this: