THE ITO WARD-7(2)(1), AHMEDABAD vs. VAISHAL KISMATLAL SHAH, AHMEDABAD

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ITSSA 4/AHD/2022Status: DisposedITAT Ahmedabad01 February 2023AY 2011-124 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the issue was squarely covered by the judgment of the jurisdictional High Court in Anilkumar Gopikishan Agarwal vs. ACIT. The Tribunal noted that the AO had not recorded a finding that the seized documents 'belonged to' the assessee. The AO of the searched person (Shri Anil Hiralal Shah) had not given any finding that the documents seized 'belonged to' the appellant while recording satisfaction. Instead, the AO of the appellant had concluded that the seized documents 'pertain/relate to' the appellant. The Hon'ble Gujarat High Court in Anilkumar Gopikishan Agrawal and others vs. ACIT held that notices under section 153C issued based on seized documents not belonging to a third party are invalid for searches initiated before 01.06.2015, as the amendment to the section is prospective. The Tribunal further relied on the Gujarat High Court's decision in PCIT-3 vs Himanshu Chandulal Patel, which stated that there must be cogent material for the AO to be satisfied that seized documents belong to someone other than the searched person, and surmise cannot substitute satisfaction. Since no such finding was made, the initiation of proceedings under section 153C was without jurisdiction and invalid. Consequently, the assessment based on such notice was annulled. The CIT(A)'s deletion of the addition was upheld.

What were the facts?

The Revenue filed an appeal before the Income Tax Appellate Tribunal (ITAT) challenging an order dated 20.01.2022 passed by the Commissioner of Income Tax (Appeals) (CIT(A)). The appeal pertained to Assessment Year 2011-12 and arose from an assessment order passed under section 153C read with section 153A of the Income Tax Act, 1961. The search action under section 132 on the group was conducted on 04.12.2014, based on seized material found from Shri Anil Hiralal Shah. The Assessing Officer (AO) initiated proceedings under section 153C against the assessee, Vaishal Kismatlal Shah, based on documents seized during the search. The assessee contended that the AO had not recorded satisfaction that the seized documents belonged to the assessee, which is a prerequisite for initiating proceedings under section 153C.

What were the issues?

1. Whether the proceedings initiated under section 153C of the Income Tax Act, 1961, are sustainable in law, given that the Assessing Officer did not record a finding that the seized documents 'belonged to' the assessee, prior to the amendment of the section effective from 01.06.2015? (Question of law and mixed fact and law, turning on Section 153C). Assessee's contention: The assessee argued that the initiation of proceedings under section 153C was not sustainable because the AO had not recorded the necessary satisfaction that the seized documents belonged to the assessee. They relied on the judgment of the Hon'ble Gujarat High Court in the case of Anilkumar Gopikishan Agarwal vs. ACIT, which held that before 01.06.2015, the AO must conclude that seized material does not belong to the searched person but to someone else. The amendment substituting 'belongs to' with 'pertains to' was prospective. Revenue's contention: The Revenue was unable to controvert the submissions made by the assessee's representative.

Which sections of the Income-tax Act were involved?

Section 153C,Section 153A,Section 132

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH

Before: Shri Waseem Ahmed

For Appellant: Shri Chetan Agarwal, A.R
For Respondent: Shri Vijay Kumar Jaiswal, CIT-DR

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH

Before: Shri Waseem Ahmed, Accountant Member And Ms. Madhumita Roy, Judicial Member

IT(SS)A No. 04/Ahd/2022 Assessment Year 2011-12

The ITO, Ward-7(2)(1), Vaishal Kismatlal Ahmedabad Shah Vs A-502, “Deevpreet”, (Appellant) Nr. DLA School, NFD Circle, Bodakdev, Ahmedabad-380054

PAN: ACVPS6854R

(Respondent)

Assessee by : Shri Chetan Agarwal, A.R. Revenue by : Shri Vijay Kumar Jaiswal, CIT-DR

Date of hearing : 30-01-2022 Date of pronouncement : 01-02-2023 आदेश/ORDER

PER: Ms. MADHUMITA ROY, JUDICIAL MEMBER:-

This appeal is filed by the Revenue as against the order dated 20.01.2022 passed by the Commissioner of Income Tax (Appeals), Ahmedabad-12 arising out of the Assessment order passed under section 153C r.w.s. 153A of the Income Tax Act, 1961 (hereinafter

2 I.T(SS).A No. 04/Ahd/2022 A.Y. 2011-12 Page No ITO vs. Vaishal Kismatlal Shah

referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2011- 12.

2.

At the very outset of the proceedings, the Ld. Advocate appearing for the assessee submitted before us and that the issue is covered by the decision passed by the Hon’ble Jurisdictional High Court at Gujarat in the case of Anilkumar Gopikishan Agarwal vs. ACIT reported in [2019] 418 ITR 25 (Guj.). In fact, the search was initiated u/s. 153C of the Act on the basis of the seized material found from and belonging to one Shri Anil Hiralal Shah. The search u/s. 132 on the group was conducted on 04.12.2014 and the Ld. A.O. of the said Shri Anil Hiralal Shah has not given any finding that the documents seized “belongs to” the appellant while recording satisfaction.

3.

As it is the settled principle of law that before arriving at the satisfaction, the Ld. A.O. must come to a conclusion that the seized material does not “belong to” the search person but somebody else as per the judgment passed by the Hon’ble Gujarat High Court as mentioned hereinabove and as the proceedings initiated u/s. 153C of the Act without being satisfied that the documents “belongs to” the assessee which was subsequently amended w.e.f. 01.06.2015 with the substitution of “pertains to”, the proceedings initiated against the assessee for the year under consideration before us is not sustainable in the eye of law as submitted by the Ld. A.R.

3 I.T(SS).A No. 04/Ahd/2022 A.Y. 2011-12 Page No ITO vs. Vaishal Kismatlal Shah

4.

Such submission made by the Ld. A.R. has not been able to be controverted by the Ld. D.R.

5.

We have further considered the judgment passed in the matter of Shri Anilkumar Gopikishan Agarwal vs. ACIT reported in [2019] 418 ITR 25 (Guj.). While dealing with the identical issue, the Hon’ble Court was pleased to observe as follows: 5.6 The appellant has claimed that the document found from the Hard Disc (supra) which formed the basis of notice u/s 153C of the Act for initiating the proceedings does not belong to it He has stated that 'Before 01.06.2015 the word belongs too assessee was there is the Act, which was substitute with word pertains to w.e.f 01.06.2015, since our period was before 01.06.2015 old law will be applicable to us.' He has relied on two case laws including the jurisdictional HC order in the case of Anilkumar Gopikishan Agarwal (supra).

5.7. There is no dispute that assessment in the case of the appellant was initiated U/S.153C of the Act on the basis of the seized material found from and belonging to the Anil Hiralal Shah et al. Search u/s 132 of the Act on the Group was conducted on 04/12/2014. The AO of Anil Hiralal Shah has not given any finding that the documents transferred ‘belongs to” the appellant while recording the satisfaction note. To the contrary he has given a finding; that the document pertains to appellant. The AO of appellant has also before issuing 153C notice concluded that the seized document 'pertain/relate to' the appellant. The Hon'ble Gujarat High Court in the case of Anilkumar Gopikishan Agrawal and others vs. ACIT (referred supra) has held that the notice u/s 153C of the Act issued in view of seized incriminating document/paper hot belonging to third party as invalid, in all cases where the search was initiated before 01/06/2015 holding that the amendment in the Act incorporating the words "any books of account or documents, seized or requisitioned/pertains or pertain to, or any information contained therein, relates to’ is prospective in nature and applicable for searches conducted after 01.06,2015. The impugned assessment in this case is framed pursuant to the notice u/s 153C of the Act issued on the basis of the documents belonging to Anil Hiralal Shah found and seized during search action dated 04/12/2014. Further Gujarat High Court in the case PCIT-3 vs Himanshu Chandulal Patel (supra) has held there must be some cogent material available with the Assessing Officer before he/she arrives at the satisfaction that the seized document does not belong to the searched person but to somebody else. Surmise and conjecture cannot take the place of "satisfaction". No such finding is found to have been made. Hence, respectfully following the binding judgments of the Hon'ble jurisdictional High Court, I also hold that the very initiation of proceedings under section 153.C of the Income-tax Act, 1961 was without jurisdiction and

4 I.T(SS).A No. 04/Ahd/2022 A.Y. 2011-12 Page No ITO vs. Vaishal Kismatlal Shah

therefore invalid. The assessment on the basis of such notice does not survive, hence, the impugned assessment is annulled. In the result, the relevant grounds of appeal 1 & 2 are allowed.

6.

Having heard the Ld. Counsel appearing for the parties, having regard to the facts and circumstances of the case and particularly the ratio laid down by the Jurisdictional High Court, we find no other alternative but to come to a conclusion that the issue is squarely covered by the said judgment and as the documents does not “belong to” the assessee noted by the A.O., the entire proceedings is thus vitiated. Hence, we find no ambiguity in the order passed by the ld. CIT(A) in deleting the addition made by the A.O. so as to warrant interference. The same is therefore upheld.

7.

In the result, the appeal filed by the Revenue is dismissed.

Order pronounced in the open court on 01-02-2023 Sd/- Sd/- (WASEEM AHMED) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 01/01/2023 True Copy आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद

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