2016 (11) TMI 1367 - AT - Income Tax

Tribunal upholds assessee's appeal, rejects Revenue's appeal on seized documents.

ASSTT. COMMISSIONER OF INCOME TAX, CC-22, NEW DELHI Versus MS. SUDHIKSHA SINGH AND M/s HABITAT ROYALE PROJECTS PVT. LTD. AND SANDEEP SINGH KHINDA Versus ACIT, CENTRAL CIRCLE-22, NEW DELHI

The Tribunal dismissed the Revenue's appeals and allowed the assessee's appeals, upholding the CIT(A)'s decision to delete the additions based on the ... Unaccounted income from sale of property - CIT(A) deleted the addition holding that the seized document does not belong to the assessee - validity of assessment u/s 153C - Held that:- There is no absolute or limited ownership of the assessee over the seized documents apart from the fact that the transactions recorded therein pertain to properties owned by the assessee. Now the requirement under the law is not regarding the ownership of the properties mentioned in the seized document but it is regarding the ownership of the document itself. As there is no intimate connection between the contents of the seized documents and the assessee and neither there is any other corroborative evidence to the effect that the assessee had received the cash portion recorded in the seized document therefore the requirement under the law that the seized document should belongs to the assessee for initiation of proceeding u/s 153C of the IT Act are not fulfilled in the case of the assessee. Therefore, Ld. CIT(A) has rightly held that the addition made based on the papers seized from the computer at the residential premises of Sh. Sandeep Singh Khinda and Smt. Samta Khinda are not in accordance with law and was therefore rightly deleted by the Ld. CIT(A). Also reference to the name of person in the seized document cannot be the basis to come to the conclusion that the document belonged to the said person. Proceedings initiated on the basis of the such assumption u/s. 153C were held to be without jurisdiction. See Vijaybhai N. Chandrani Versus Assistant Commissioner of Income-tax [2010 (3) TMI 770 - Gujarat High Court] - Decided against revenue Addition unaccounted income or receipt during the year under consideration on sale of Property applying Sec 292C - non reference to DVO - Held that:- There is thorough lack of corroborative and confirming evidence and thorough lack of enquiry on the part of AO where all cases were with him only. No attempt is made to make reference to DVO by AO or CIT-A. There is no examination of any concerned witness/party to transaction. Only suspicion has weighed to make the colossal addition. There is no hidden bank a/c so as to transact the given money. There is no bayana agreement or any other adversarial document found during extensive search operation specific to charge made. The charge made against the assessee only resolves around a single piece of Paper which is not handwritten from any of the transacting parties. Even if the document is taken on face value than no gainful premium construction can be taken as neither the seller} nor the buyer is taken on board at the time when this subject paper was found. This paper is out of syllabus for Mr. Sandeep Khinda not being the owner of the property. Section 292C being rebuttable presumption cannot made assessee's burden to be infallable as the same can't be elevated to be proven to the hilt i.e as far as Sudhiksha is concerned, assumption of jurisdiction u/s 153C is concerned to make a document to be belonging to the assessee, presumption u/s 292C can't be resorted i.e belonging to criteria can't be satisfied on the basis of presumption & assumption. As per record Mrs. Sudhiksha Singh another assessee had disclosed this transaction voluntarily in normal course by paying due capital gain u/s 50C read with section 48 i.e there is no sanction & under the present law to tax a seller over & above the given transaction rate which is well considers the applicable rate otherwise sec 50c will become redundant. This can be a fiction in fiction i.e. 292 can't be infused a incorporated in section 50c. In our view, suspicion how grave & strong can't substitute the place of reliable cogent evidence to fasten a tax liability. Thus as in the present case, the detail of the property i.e D-17 Pushpanjali, against which it has been alleged by the Ld AO that' On Money' has been received against the sale of property was never owned by the assessee. However, there is no iota of evidence with the Department to suggest that loose sheet disclose receipts resulting in an undisclosed income on the part of the assessee. Therefore there is no question of assessing any income in the hands of the assessee .- Decided against revenue Protective addition of income - Held that:- CIT(A) has rightly observed that since the source of the investment in cash for ₹ 74 lacs is forming part of the cash of ₹ 3.50 crores which has been held as unaccounted income of Sh. Sandeep Singh Khinda in his appellate order for AY 2007-08, therefore, the amount of ₹ 74 lacs is a case of application of income already brought to tax on substantive basis in case of Sh. Sandeep Singh Khinda. Accordingly, he directed the AO to delete the protective addition of ₹ 74 lacs in the case of assessee i.e. M/s Habitat Royale Projects P Ltd. made by AO. However, as aforesaid, in the case of Sandeep Singh Khinda vide for the assessment years 2007- 08 and 2008-09, we have already deleted the addition of ₹ 3.50 crores and ₹ 17.50 crores respectively, therefore, the question of deletion of addition of ₹ 74 lacs does not arise as the investment in cash for ₹ 74 lacs was forming part of the cash of ₹ 3.50 crores - Decided against revenue Issues Involved:1. Deletion of additions on account of unaccounted income from the sale of property.2. Deletion of additions on account of unexplained investment in property.3. Validity of proceedings initiated under Section 153C of the Income Tax Act, 1961.4. Interpretation of provisions of Section 153C read with Section 153A of the Income Tax Act, 1961.5. Connection between the seized document and the assessee.6. Evidence of cash portion recorded in the seized document.7. Protective vs. substantive additions.Issue-wise Detailed Analysis:1. Deletion of Additions on Account of Unaccounted Income from Sale of Property:The Revenue challenged the deletion of Rs. 3.50 crores (AY 2007-08) and Rs. 17.50 crores (AY 2008-09) made by the Assessing Officer (AO) on substantive basis. The CIT(A) deleted these additions, holding that the seized documents did not belong to the assessee. The Tribunal upheld this decision, noting that the documents were seized from the premises of Sandeep Singh Khinda and his wife, not from the assessee. There was no evidence that the documents were in the handwriting of the assessee or that the assessee had received the cash portion recorded in the seized document.2. Deletion of Additions on Account of Unexplained Investment in Property:The Revenue's appeals also contested the deletion of Rs. 1 crore (AY 2007-08) and Rs. 5 crore (AY 2008-09) on protective basis. The CIT(A) found no intimate connection between the seized document and the assessee, and no corroborative evidence that the assessee received the cash portion recorded in the document. The Tribunal agreed, emphasizing that the ownership of the seized document, not the property, was crucial for initiating proceedings under Section 153C.3. Validity of Proceedings Initiated Under Section 153C:The Tribunal examined the satisfaction note for initiating proceedings under Section 153C and found it invalid. The note did not demonstrate that the documents belonged to the assessee, as required by law. The Tribunal cited the Delhi High Court's decision in Pepsi Food Pvt. Ltd. v. ACIT, which emphasized that the AO must demonstrate how the document belongs to the assessee. The Tribunal concluded that the proceedings under Section 153C were not validly initiated.4. Interpretation of Provisions of Section 153C Read with Section 153A:The Tribunal noted that the CIT(A) had correctly interpreted the provisions of Section 153C read with Section 153A. The requirement under the law is regarding the ownership of the document itself, not the properties mentioned in the document. The Tribunal upheld the CIT(A)'s finding that the seized documents did not belong to the assessee, thus invalidating the proceedings under Section 153C.5. Connection Between the Seized Document and the Assessee:The Tribunal found no intimate connection between the contents of the seized document and the assessee. The properties mentioned in the document were legally owned by the assessee, but the ownership of the document itself was not established. The Tribunal upheld the CIT(A)'s decision to delete the additions, as the seized documents did not belong to the assessee.6. Evidence of Cash Portion Recorded in the Seized Document:The Tribunal noted that there was no evidence that the assessee had received the cash portion recorded in the seized document. The CIT(A) had correctly held that the document should be read in totality, and when cheque payments mentioned in the document were reflected in the assessee's books, the cash portion could not be denied. The Tribunal upheld the CIT(A)'s decision to delete the additions based on the seized documents.7. Protective vs. Substantive Additions:The CIT(A) had confirmed the additions on protective basis in the hands of Sandeep Singh Khinda, validating the transaction recorded in the seized document. However, the Tribunal found that the protective additions were not justified, as the seized documents did not belong to the assessee. The Tribunal deleted the protective additions, noting that the AO had not demonstrated that the documents belonged to the assessee.Conclusion:The Tribunal dismissed the Revenue's appeals and allowed the assessee's appeals, upholding the CIT(A)'s decision to delete the additions based on the seized documents. The Tribunal found that the seized documents did not belong to the assessee, and the proceedings under Section 153C were not validly initiated. The Tribunal emphasized the importance of establishing the ownership of the document itself for initiating proceedings under Section 153C.