INCOME TAX ACT, 1961

Section 153C Section 132(4)

Search and seizure - Proceedings under section 153C - Computation of undisclosed income being payment to land owners towards purchase of land -

Assessment proceedings under section 153C were initiated in the hands of the person, other than the searched person, i.e., the assessee herein. On being confronted with the loose paper and the statement of searched person (MGP), being managing partner of firm as recorded at the time of search under section 132(4), in the course of assessment under section 153C, the assessee sellers asserted that the sale transactions have been carried out through banking channels and had been duly recorded in books and accounted for the purposes of determination of tax liability. The assessee seller denied having received any unaccounted money over and above recorded transactions towards sale consideration. However, AO disregarded the stand of assessee and proceeded to make estimation of unaccounted receipts arose to the respective sellers, i.e., assessees herein on sale of their respective holdings in land. The unaccounted income was estimated in proportion to the respective holdings of these sellers, viz., Kantilal P. Patel (KPP) ; Chhotalal P. Patel (CPP) and Rakesh K. Patel (RKP). These additions were the subject-matter of present controversy. Whereabouts of similar action under section 153C, if any, for a part component allegedly attributable in the hands of Rakesh Patel were, however, not known at this stage. CIT(A) also upheld action of the AO for assuming jurisdiction for assessment under section 153C on the ground that loose paper found in search clearly relates to the assessees. Held: CIT(A) had paradoxically given totally untenable observations made in paras 7.7 and 7.8 to lend support to the action of the AO. For instance: (i) the CIT(A) observed that MGP was under obligation to identify the persons to whom the payment of Rs. 5.37 crores have been paid. Hence, for failure of MGP to give details and for failure of the search party to seek specific details thereon and yet again nonchalance demonstrated by the AO in remand proceedings, the assessee (a third party) was being sought to be crucified; (ii) the statutory presumption embodied under sections 292C and 132(4A) for documents found in search operates adverse to the person in whose control or possession, such documents were found and none else. However, in a glaring demonstration of perversity, the assessee herein had been held to be responsible for failure of the searched person to discharge purported onus cast upon him ; (iii) the stand of CIT(A) on admissibility of affidavit is marred by gross inconsistency. CIT(A) finally concluded that the affidavit cannot be admitted as reliable evidence mainly for the reason that the searched person had not discharged his onus to provide identification, etc. Whole sequence and pattern was delightfully inconsistent and contradictory to one another. Overtly, the CIT(A) had sought to implicate the assessee for action/inaciton of somebody else without any opportunity of rebuttal. The text and tenor of the observations of the CIT(A) were thus totally uncomplimentary.

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