Property sellers

[2013] 33 taxmann.com 66 (Article) - SRINIVASAN ANAND G. - PROPERTY SELLERS – BEWARE OF SECTION 153C

[2013] 33 taxmann.com 66  (Article)

Property Sellers - Beware of section 153C

SRINIVASAN ANAND G.

CA

Introduction

1. Section 153C of the Act pertains to assessment of income of any person other than the person searched.

Section 153C provides that:

♦		where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A,
♦		then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and
♦		that the Assessing Officer shall proceed against each such other person issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A.
♦		Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person."

It may so happen that sale deeds executed by seller of properties in favour of buyer-builder and agreements with tenants by seller before sale to get properties vacated by paying money to tenants are recovered during search u/s 132 in buyer's premises. Can these documents be said to belong to the seller (i.e. a person other than the person searched) within the meaning of section 153C? Can action be initiated against the seller on the basis of these documents? This issue fell for consideration before the Gujarat High Court inKamleshbhai Dharamshibhai Patel v. CIT [2013] 31 taxmann.com 50.

Facts of the case

2. The facts of the case were as under:

♦		Petitioners (individuals being family members) sold their properties to company engaged in construction business (buyer).
♦		Buyer-company wanted vacant possession of properties sold
♦		Sellers paid moneys to tenants entered into formal agreements with them to vacate properties and got them vacated
♦		During a search under section 132 on buyer-company, the sale deeds executed by seller in favour of buyer company and agreements with erstwhile tenants of properties were recovered
♦		Based on such documents, ACIT initiated assessment proceedings by issuing notice dated 25-9-2012 under section 153C against petitioners-sellers
♦		Petitioners challenged the notices issued under section 153C in instant writ petitions before the Gujarat High Court

3. Petitioner's contentions

♦		Under section 153C of the Act action can be taken only if any money, bullion, jewellery or other valuable articles or things or books of account or documents seized or requisitioned belong to a person other than the person searched.
♦		When the lands in question were already sold under the sale dated 18-9-2010, these documents in question cannot be stated to belong to the petitioners.
♦		Once the title in the land vested in the purchases, none of the documents could be stated to belong to the petitioners.

Held

4. The Gujarat High Court held as under:

♦		The petitioners required vacant possession of the land to be able to pass on the title and vacant possession.
♦		To be able to do so, the petitioners entered into agreements with the tenants.
♦		Such documents thus are documents which definitely belong to the petitioners.
♦		Simply because on subsequent date, the land was sold, may have a bearing on the title of such land, the same would not in any manner alter the nature of the document concerned.
♦		Such documents belong to the petitioners and continue to so belong, irrespective of the transfer of the title of the land.
♦		One cannot see how the petitioners can contend that simply because at a subsequent point of time they disposed of the property and transferred the title to the purchasers, the documents since to belong to them.
♦		Term "belong" is not defined and does not have legally technical connotation and therefore, we once again fall back on the dictionary meaning of the same.
♦		The term "belong to" has not been defined in the Act.
♦		In the Webster's Third New International Dictionary, the word, "belong" is described as, "to have relation or reference to a person or thing".
♦		In Advanced Law Lexicon by P. Ramanatha Aiyar [3rd Edition], the term, "belong" in context of section 400 IPC means, "implied something more than the idea of casual association; it involves a notion of continuity and indicates a more or less intimate connection with a body of persons extending over a period of time sufficiently long to warrant the inference that the person affected was identified himself with a band, the common purpose of which is the habitual commission of dacoity."
♦		The document executed between the erstwhile tenants of the petitioners regarding eviction of the tenants upon acceptance of sizeable payment by the petitioners definitely thus belong to the petitioners.
♦		It may be that as an evidence of passing on vacant and peaceful possession of the property, the petitioners handed over such documents to the purchasers to protect the interest of the purchasers against any action that may be initiated by the erstwhile tenants.
♦		The nature of the document or the fact that it belongs to the petitioners would not in any manner change.
♦		Likewise, the documents of sale also can be stated to belong to the petitioners.
♦		It is not in dispute that the petitioners were the sellers of the lands.
♦		They do not either doubt or dispute the documents of sale, or their respective signatures thereon.
♦		We need to ascertain if such document can be stated to "have relation or reference to" to the petitioners.
♦		As noted, the petitioners were as sellers of the land, parties to the documents. They had admittedly executed such sale deeds.
♦		It cannot be stated that the sale deeds do not belong to them.
♦		Likewise, the receipts of payments also are documents belonging to the petitioners.
♦		They are alleged to have received various payments in cash from the purchasers.
♦		If there are documents evidencing such particulars and if such documents are also signed by the petitioners, it can certainly be stated that such documents do belong to the petitioners.
♦		Under the circumstances, the action initiated under section 153C of the Act cannot be quashed. Petitions are therefore dismissed.

Conclusion

5. Documents recovered during search under section 132 on buyer's premises are deemed to belong to the seller of properties within the meaning of section 153C, if documents recovered include sale deeds and agreements entered into for vacation of property between sellers and tenant before conclusion of such sale. Such documents give jurisdiction to AO under section 153C to initiate an action against "such other person" (i.e., person other than the person whose premises are searched).

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• DT - Secs. 132, 132A, 153A & 153C