Rule 112F Exception Applies Only If Seized Assets Relate to Ongoing Assembly or Parliamentary Elections | HC

Case Details: St. Antony Educational and Social Society v. CBDT - [2023] 156 taxmann.com 283 (Madras)

Judiciary and Counsel Details

• • C. Saravanan, J.
  • N.R.S. Ganesan for the Petitioner.
  • A.P. Srinivas & A.N.R. Jayaprathap for the Respondent.

Facts of the Case

Tamil Nadu State Surveillance Team (SST) intercepted two persons, R and M, who were found carrying substantial cash in a vehicle.

Subsequently, statements were recorded under section 131(1A) wherein R stated that a self-cheque of the assessee’s name was given to him, which was signed by the Chairman of the assessee-educational society which was credited as the salary of staff/ employees into their personal savings account and thereafter withdrawn by collecting self-drawn cheques duly signed by them.

Later, AO issued notices and assessed the assessee under section 143(3) read with section 153(b)(1).

Assessee challenged the assessment order on the ground that Rule 112F was attracted in the case of assessee as when cash was seized, the Tamil Nadu State Assembly Model Code was in operation. Therefore, the Assessing Officer (AO) cannot issue notices to assess or reassess the total income for six previous assessment years.

High Court Held

The Madras High Court held that the exception under Rule 112F(ii) of the Income Tax Rules, 1962, will apply only where the assets so seized or requisitioned are in any manner connected with the ongoing election in an assembly or Parliamentary constituency.

Rule 112(F) prohibits an AO from issuing notices for assessing or reassessing preceding assessment years if a search or requisition occurred in an area covered by a notification under the Representation of the People Act, 1951. However, the exception will apply only where the assets so seized or requisitioned are found in any manner connected with the ongoing election in an assembly or Parliamentary constituency.

Thus, this exception is not applicable to the facts of the case, as records indicate that it was the practice of the petitioner to withdraw the cash of staff/employee at least from January 2021, if not before, as is evident from the statement of R on 10.03.2021

Search or requisition during the Tamil Nadu State Assembly Election’s Model Code of Conduct doesn’t automatically exclude the issuance of notices under Section 153A or Section 153C, nor does it trigger the exception in Rule 112F(ii) of the Income Tax Rules, 1962.

If the seized cash isn’t linked to the assembly election, the exemption from the scope of proceedings under Sections 147, 153A/153C cannot be allowed.