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CIT vs. Renu Constructions Pvt. Ltd (Delhi High Court)
September, 26th 2017

Search assessment u/s 153C: Proceedings u/s 153C of the Act can be initiated against a person only if the seized materials "belongs" to that person. It is not sufficient for the Revenue to urge that the seized document "pertains" to the person. Sinhgad Technical Education Society [2017] 84 Taxmann.com 290 (SC) followed

(i) Mr. Manchanda, learned Senior Standing Counsel appearing for the Revenue, places reliance on decisions of the this Court in Principal Commissioner of Income Tax v. Super Malls Pvt. Ltd., [2017] 393 ITR 557, Principal Commissioner of Income Tax Central Circle-II v. Satkar Fincap Ltd. [2017] 393 ITR 378 and Principal Commissioner of Income Tax (Central-2) v. Nau Nidh Overseas Pvt. Ltd. [2017] 394 ITR 753 (Delhi) to urge that, notwithstanding the fact that the search in the present case took place prior to the amendment to Section 153C of the Act with effect from 1st June 2015, it is sufficient, for the purpose of initiation of proceedings under Section 153C of Act, that the seized documents pertained to the Assessee and did not have to be shown at that stage to be belonging to the Assessee.

(ii) Learned counsel for the Respondents-Assessees, on the other hand, pointed out that this Court has, in Principal Commissioner of Income Tax (Central-2) v. Vinita Chaurasia [2017] 394 ITR 758 (Del), after considering the aforementioned three decisions, reiterated the settled legal position as explained in Pepsico India Holdings P. Ltd. v. ACIT [2015] 370 ITR 295 (Del), that for the purpose of initiating proceedings under Section 153C of the Act, the seized documents had to be shown to belong to the other person and not merely pertaining to such other person. The change brought about in this regard in Section 153 C of the Act by way of amendment has been given prospective effect from 1st June 2015. The amended provision therefore has no application to the cases on hand.

(iii) The recent decision of the Supreme Court in Commissioner of Income Tax, Pune v. Sinhgad Technical Education Society [2017] 84 taxmann.com 290 (SC) settles the legal position in favour of the Assessees. The Supreme Court, while affirming the judgment of the Bombay High Court, approved the decision of the Gujarat High Court in Kamleshbhai Dharamshibhai Patel v. Commissioner of Income Tax-III, (2013) 263 CTR (Guj) 362 that a document seized ‘should belong to a person other than the person referred to in Section 153A of the Act’. It has been categorically observed by the Supreme Court that the above position of law laid down by the Gujarat High Court is correct.

(iv) Consequently, this Court rejects the contention of the learned counsel for the Revenue that even prior to 1st June 2015 at the stage of initiation of proceedings under Section 153C of the Act, it is sufficient if the seized document ‘pertained to’ the other person and it is not necessary to show that the seized material ‘belonged to’ the other person. This legal position has been explained by this Court in its recent decision dated 10th July 2017 in W.P. (C) No. 3241/2015 (Canyon Financial Services Ltd. v. Income Tax Officer).

(iv) As far as ITA No. 499/2011 is concerned, the Court finds that there is an additional ground to reject the appeal of the Revenue. The satisfaction note recorded by the AO in that case does not even refer to the seized documents.

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