Criteria for proceedings u/s 153C of the Income Tax Act, 1961

This case examines the criteria for initiating proceedings under Section 153C of the Income Tax Act, 1961. The core issue revolves around whether a sum of Rs. 2.44 Crores received by an Association of Persons (AoP) was part of the sale consideration for land or a settlement payment. The High Court remanded the case to the Tribunal to specifically decide on the satisfaction required for starting Section 153C proceedings.

IN THE INCOME TAX APPELLATE TRIBUNAL
“C” BENCH : BANGALORE

BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT
AND SHRI B. R. BASKARAN, ACCOUNTANT MEMBER

ITA No.347/Bang/2012
Assessment year : 2007-08

The Assistant Commissioner
of Income Tax,
Central Circle - 2(3),
Bengaluru.
APPELLANT 

Vs. 

M/s. Everglades,
No.1146, 12th Main, 1st Cross,
HAL 2nd Stage,
Bengaluru-560038.
PAN : AAAAE 2295 E
RESPONDENT

Appellant by : Shri. Pradeep Kumar, CIT(DR)(ITAT), Bengaluru.
Respondent by : Shri. Balachandran and Shri. Shiva Prasad Reddy, Advocates

Date of hearing : 19.07.2021
Date of Pronouncement : 23.07.2021

O R D E R

Per N.V. Vasudevan, Vice President

 The facts and circumstances under which this appeal by the revenue is listed for hearing before the Tribunal is as follows:

2. The assessee is an Association of Persons (AoP). One Shri. D. K. Sharma with 10% share and M/s. Akme Projects Ltd., with 90% shares are the members of the AoP.

3. During the previous year relevant to Assessment Year 2007-08, the AoP sold lands in Varthur Hobli, Bengaluru East Taluk, under sale deed dated 28.12.2006 to one Shri. R. B. Nataraj, nominee of M/s. Sobha Developers Ltd., for a consideration of Rs.1.06 Crores. There is no dispute that this transaction has been reflected in the books of account of the AoP. The return of income for the Assessment Year 2007-08 was filed by the assessee on 15.10.2007. The Order of Assessment passed u/s.153C of the Income Tax Act, 1961 (hereinafter called ‘the Act’) is not clear as to whether any intimation under section 143(1) of the Income Tax Act, 1961 (hereinafter called ‘the Act’) was issued but no order u/s.143(3) of the Act was passed.

4. A search under section 132 of the Act was carried out in the case of one Shri. M. Krishna on 26.08.2008. Shri. D. K. Sharma, one of the members of the AoP was also searched on 25.08.2008. In the course of search of Shri. M. Krishna,certain documents were found. Consequent to the said search, the case of the assessee AoP as well as Shri. D. K. Sharma and other connected persons were centralized with the DCIT, Central Circle – 2(3), Bengaluru. The AO of the searched person and the assessee AoP were therefore one and the same.

5. The proceedings under section 153C of the Act were initiated against the assessee by issue of notice dated 19.07.2010. As already mentioned, with reference to the original return of income filed by AoP on 15.10.2007, no scrutiny assessment was completed. The assessee filed a letter dated 14.09.2010 requesting the AO to consider the return already filed on 15.10.2007 as a return filed in response to the notice under section 153C of the Act.

6. The issue that arose for consideration in the course of the assessment proceedings was as whether a sum of Rs.2.44 Crores received by the assessee from Shri. D. K. Sharma under a pay order dated 28.12.2006 is assessable as income in the hands of the assessee. It was the case of the Revenue that there was a settlement deed dated 28.06.2006 under which M/s. Sobha Developers Ltd., paid a sum of Rs.2.44 Crores in addition to the sum of Rs.1.06 Crores paid as consideration for purchase of land. The money was stated to have been paid through Shri. D. K. Sharma to the assessee. According to the Revenue, the aforesaid sum was nothing but part of the sale consideration for sale of the land. According to the assessee, the sum of Rs.2.44 Crores was nothing but money given to the assessee to settle dispute and litigation in respect of the properties that was sold to M/s. Sobha Developers Ltd., and was not in the nature of income in the hands of the Assessee.

7. Ultimately, a sum of Rs.2.44 Crores was assessed to tax in the hands of the assessee. The CIT(A), however, agreed with the plea of the assessee and deleted the addition. On further appeal by the Tribunal in ITA No.347/Bang/2012 order dated 29.07.2016 reversed the order of the CIT(A) and restored the order of the AO by allowing the appeal of the Revenue. The assessee preferred an appeal before the Hon’ble High Court against the order of the Tribunal and the Hon’ble High Court in ITA No.666/2016 by order dated 30.11.2017 remanded the case with the Tribunal to decide the issue with regard to the existence of satisfaction for initiating proceedings under section 153C of the Act. It is pursuant to the aforesaid order of the Hon’ble High Court that this appeal has been listed before the Tribunal for hearing. 

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