2014 (8) TMI 898 - HC - Income Tax

Possession of photocopies doesn't prove ownership under Section 153C; notice quashed for lack of original document ownership

Pepsico India Holdings Private Limited Versus Assistant Commissioner of Income Tax & Another

Pepsico India Holdings Private Limited Versus Assistant Commissioner of Income Tax & Another - [2015] 370 ITR 295 (Del) Issues Involved:1. Validity of notices issued under Section 153C of the Income Tax Act, 1961.2. Satisfaction of the Assessing Officer regarding the documents seized during the search.3. Ownership and possession of the documents seized.4. Interpretation of the terms 'belongs to' vs. 'relates to' or 'refers to'.Detailed Analysis:1. Validity of Notices Issued Under Section 153C:The petitioner sought the quashing of notices issued on 02.08.2013 under Section 153C of the Income Tax Act for the assessment years 2006-2007 to 2011-2012. These notices were issued following a search and seizure operation conducted on 27.03.2012 on the Jaipuria Group. The Revenue claimed that documents 'belonging' to the petitioner were found during this operation. The court examined whether the notices were validly issued under Section 153C, which requires the Assessing Officer of the searched person to be 'satisfied' that the documents seized belong to a person other than the searched person.2. Satisfaction of the Assessing Officer:The court referenced a previous judgment in Pepsi Foods Pvt. Ltd. v. Assistant Commissioner of Income Tax, which clarified that the Assessing Officer must arrive at a clear satisfaction that the documents seized do not belong to the searched person but to someone else. The court emphasized that mere mention of the word 'satisfaction' in the note is insufficient; the note must display the reasons or basis for the conclusion. In this case, the court found that the Satisfaction Note dated 29.07.2013 did not adequately rebut the presumption that the documents belonged to the Jaipuria Group, as required under Sections 132(4A)(i) and 292C(1)(i) of the Act.3. Ownership and Possession of the Documents Seized:The court examined the specific documents listed in the Satisfaction Note:- Photocopies of Cumulative Redeemable Preference Shares.- Unsigned cheques found in the cheque books of the Jaipuria Group companies.- A photocopy of a Supply and Loan Agreement between Pearl Drinks Limited and the petitioner.The petitioner argued that the photocopies of the preference shares and the Supply and Loan Agreement belonged to the Jaipuria Group, and the original documents were with the petitioner. The unsigned cheques were still in the possession of the Jaipuria Group and had not been handed over to the petitioner. The court agreed with the petitioner, stating that the documents found during the search could not be said to belong to the petitioner.4. Interpretation of 'Belongs to' vs. 'Relates to' or 'Refers to':The court clarified that the term 'belongs to' should not be confused with 'relates to' or 'refers to'. For instance, a registered sale deed belongs to the purchaser, even though it relates to or refers to the vendor. Similarly, the documents in question, such as the preference shares, unsigned cheques, and the Supply and Loan Agreement, could not be said to belong to the petitioner merely because they referred to or related to the petitioner.Conclusion:The court concluded that the conditions for invoking Section 153C were not satisfied as the documents did not belong to the petitioner. Consequently, the notices issued under Section 153C on 02.08.2013 were quashed, and all proceedings pursuant to those notices were also quashed. The writ petitions were allowed, and there were no orders as to costs. All pending applications were disposed of.