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2024 Supreme(Del) 764
IN THE HIGH COURT OF DELHI AT NEW DELHI
RAVINDER DUDEJA, YASHWANT VARMA, JJ.
Pr. Commissioner Of Income Tax (Central)-3 - Appellant
Versus
M/s. Tdi Infrastructure Ltd – Respondent
ITA 494 of 2022, ITA 495 Of 2022
Decided On : 27-11-2024
For the Appellant : Mr. Gaurav Gupta, SSC Mr. Shivendra Singh & Mr. Yojit Pareek, JSCs
For the Respondent:Mr. Salil Aggarwal, Senior Advocate with Mr. Uma Shankar and Mr. Mahir Aggarwal, Advs.
IMPORTANT POINT
The court ruled that jurisdiction under Section 153C requires the Assessing Officer to prove that seized documents belong to the Assessee, not merely relate to them.
Headnote:
(A) Income Tax Act, 1961 - Section 153C - Jurisdiction of Assessing Officer - The court held that the ITAT correctly concluded that the AO had wrongly assumed jurisdiction under Section 153C as no incriminating material belonging to the Assessee was found during the search. (Paras 20-22)
(B) Legal Principles - The court reaffirmed that the assumption of jurisdiction under Section 153C requires the AO to establish that the seized documents belong to the Assessee, not merely pertain to or relate to them. (Paras 16-19)
Facts of the case:
The appeals arose from the ITAT's order allowing the Assessee's appeal against the additions made by the AO under Section 153C, which were based on documents not belonging to the Assessee.
Findings of Court:
The ITAT's decision was upheld, confirming that the AO's jurisdiction was improperly assumed due to lack of incriminating evidence.
Issues: The main issue was whether the AO's assumption of jurisdiction under Section 153C was justified based on the documents seized.
Ratio Decidendi: The court emphasized that the jurisdiction under Section 153C requires the AO to demonstrate that the seized documents belong to the Assessee, which was not established in this case.
Result: Appeals dismissed.
JUDGMENT :
(Ravinder Dudeja, J.)
1. These two appeals impugn the common order dated 11.05.2020 of the Income Tax Appellate Tribunal [“ITAT”] for the Assessment Year [“AY”] 2007-08 & 2008-09.
2. The common questions of law sought to be urged by the Revenue for the consideration of this Court and crystallized in the Court’s order dated 12.04.2023 are as under:-
"D. Whether Hon'ble ITAT has erred in considering Section 153C restricts assessment beyond the documents considered for deriving satisfaction note for starting the proceedings of the other person?
E. Whether Hon'ble ITAT has erred in considering Section 153C restricts assessing officer to enquire beyond the documents considered for deriving satisfaction note for starting the proceedings of the other person?”
3. Search and seizure operations under Section 132 of the Income Tax Act, 1961 were conducted in the case of Taneja-Puri Group of cases in various premises on 05.01.2009. During the course of the said search, incriminating material in relation to the respondent were unearthed. Significantly, the premises of respondent company were also covered under a survey operation covered under Section 133-A of the Act.
4. The facts as far as AY 2007-08 is concerned, are that a notice under Section 153C was issued to the Assessee. In response to the said notice, respondent filed its return of income on 20.10.2010, declaring current year income of Rs. 53898676/-, which was fully setoff against unabsorbed brought forward claim for business losses.
5. The original return was filed by the assessee on 30.09.2007, declaring total income of Rs. 469913140/-. There was a difference between the return filed under Section 153C and the return dated 30.09.2007 arising on account of additional claim of brokerage paid and interest charged by the respondent which was not claimed earlier.
6. By virtue of Assessment Order dated 31.12.2010 under Section 153C read with Section 143(3) of the Act, Assessing Officer [“AO”], made the following additions:-
“a. Addition of Rs. 64,34,57,334/- by disallowing the claim for brokerage and interest charges. The said addition was disallowed on merits as well as the impermissibility of raising a fresh claim in a return filed in response to S. 153C of the Act. It is a matter of record that the Respondent has been consistently maintaining its books of accounts on the basis of Percentage Completion Method - wherein interest and brokerage is capitalised under Work In Progress, and taken to profit & loss account only in proportion of the sale, based on percentage completion. However, there exist no circumstances to justify departure from this practice and further aggravated by the Respondent's illegal approach to claim this deduction in the return filed under S. 153C of the Act.
b. Addition of Rs. 1,15,00,000/- made on the strength of documents recovered from the Respondent's premises at Kundli. The said papers reflect payments made to Arvindji and subsequent adjustment made to the payments made by him for consolidation of land.
c. Denial of claim for deduction under S. 80(IB) of Rs. 15,45,21,5311- as the respondent, had violated conditions (c) of Section 80 18(10) of the Act. It is submitted that the housing project being developed by the respondent consists of different categories of flats having different built-up area. Since the housing project of the respondent is located within a distance of less than 25 kilometres from Delhi, the built up area of each residential unit in the project has to be a maximum of 1000 square feet. By assessing officer peruse the maps duly approved by the competent authority, which were filed by the respondent to conclude that flats in certain towers were of bigger sizes and had built up area of more than 1000 square feet.”
7. Aggrieved by the Assessment Order, respondent approached Commissioner of Income Tax (Appeals) [“CITA”]. Vide order dated 22.06.2012, the First Appellate Authority held as follows:-
“a. Addition of Rs. 64,34,57,334/- o
