Section 292C — Presumption as to Assets, Books of Account, etc.

Section 292C of the Income-tax Act, 1961, establishes a legal presumption regarding the ownership and correctness of assets, books of account, and other documents found during a search or survey operation. This section applies when the Income Tax Department conducts a search under Section 132 or a survey under Section 133A. The presumption is that the assets or documents belong to the person in possession of them and that the contents of such documents are true. This presumption is significant because it shifts the burden of proof onto the taxpayer to disprove the ownership or correctness of the documents or assets. In practice, this section is crucial during tax assessments following search and survey operations, as it aids the tax authorities in establishing a prima facie case against the taxpayer.

Common Litigation Flashpoints

1. Disputes over the ownership of assets found during a search
2. Challenges to the authenticity of documents seized
3. Arguments against the presumption of correctness of seized documents
4. Burden of proof on taxpayers to disprove presumptions

Judgments on Section 292C — Presumption as to Assets, Books of Account, etc.

• Vodafone International Holdings B.V. vs Union of India & Anr. — SC,
  Section 9 of the Income Tax Act does not cover indirect transfers of capital assets situated in India.
• The Authority for Advance Rulings (Income Tax) and Others vs Tiger Global International II Holdings — SC,
  The DTAA between India and Mauritius allows capital gains to be taxed only in Mauritius, provided the entity holds a valid TRC.
• SAP Labs India Private Limited vs Income Tax Officer, Circle 6, Bangalore — SC,
  The High Court can scrutinize the Tribunal's determination of the arm's length price if it is alleged to be perverse or not in accordance with the guidelines under the IT Act and Rules.
• Sony Ericsson Mobile Communications India Pvt. Ltd. vs Commissioner of Income Tax – III — HC,
  AMP expenses can be considered an international transaction if they benefit the foreign AE and require compensation at arm's length price.
• M/s DIT (International Taxation), Mumbai vs M/s Morgan Stanley & Co. INC — SC,
  A Permanent Establishment exists if services are furnished through employees in India, and the arm's length price should be determined using the most appropriate method, such as TNMM.
• Maruti Suzuki India Ltd vs Commissioner of Income Tax — HC,
  AMP expenses incurred by an assessee cannot be treated as an international transaction under Section 92B unless there is evidence of an agreement or understanding with the associated enterprise.
• Aditya Birla Nuvo Limited vs The Deputy Director of Income-tax — HC,
  The beneficial ownership of shares, despite being registered in the name of a permitted transferee, determines the taxability of capital gains in India.
• ACIT vs M/s Majestic Properties (P) Ltd. — ITAT,
  Mere jottings on loose papers without corroborative evidence cannot form the basis for assessing undisclosed income.