2025 (11) TMI 1768 - AT - Income Tax

Assessment under section 153C quashed where seized ledger didn't identify assessee and satisfaction note proved factually wrong

ITAT Delhi quashed the assessment u/s 153C against the assessee company, holding that the jurisdictional requirement of seized material 'belonging to' the ... Validity of proceedings u/s 153C - absence of seized documents belonging to the assessee - Assessee argued additions holding that seized document does not “belong to” the appellant company HELD THAT:- Seized document i.e. copy of ledger nowhere suggests the name of the assessee. The seized document only mentions that “Received from Ajit Singh Rs. 75 lakhs”. The name of the assessee company do not appear in the seized document. It is a transaction between Shri Rakesh Kumar Yadav and Shri Ajit Singh. The reason given by the AO in the satisfaction note to say that the transaction belongs to or pertains to the assessee is that during the course of post search enquiries and investigation the assessee submitted letter dated 16.06.2014 in the office of DDIT-II, Gurgaon wherein assessee accepted the financial transactions recorded in the seized documents through an excel sheet and on going through the excel sheet submitted by the assessee it was noted that the transactions in respect of M/s Planet Infra Promoters Pvt. Ltd. mentioned above duly matched with the entries found recorded on incriminating documents. However, we find that this letter dated 16.06.2014 purportedly said to have been filed by the assessee before the DDIT-II, Investigation, Gurgaon was not filed by the assessee but was filed by Antriksh Group of Companies and also these companies owned up all the transactions in the seized materials, and this fact was taken note of by the Tribunal while dealing with similar case in the case of DCIT vs. Shri Jethmal Mehta [2023 (11) TMI 324 - ITAT DELHI] Satisfaction note recorded by the AO in the case of the assessee that the assessee submitted a letter dated 16.06.2014 and accepted the financial transactions recorded in the seized documents through excel sheet and the transactions mentioned therein duly matched with the entries found recorded on incriminating documents is factually not correct and as such recording of satisfaction note stating that incriminating documents found from the possession of Shri Rakesh Kumar Yadav reveals transaction made for Assessee company and the financial transactions recorded in seized document duly matched and accepted by Assessee is without any basis. Therefore, we are of the view that the AO could not in the satisfaction note recorded, established that the seized documents belong/pertains to or relates to the assessee and thus, the addition made based on such seized documents which were already considered in the Antriksh Group of Companies cannot be considered for making an addition in the hands of the assessee. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the conditions for valid assumption of jurisdiction under section 153C were satisfied, in particular whether the seized document (page 19 of Annexure A-3) could be said to 'belong to', 'pertain to' or 'relate to' the assessee. 1.2 Whether the satisfaction note recorded under section 153C was valid and adequate, having regard to the contents of the seized document, the alleged nexus with the assessee, and the reference to the letter dated 16.06.2014. 1.3 Whether the amendment to section 153C by the Finance Act, 2015 (substituting 'belongs to' with 'pertains to or relates to') applied to searches conducted prior to 01.06.2015, and its effect on the present case. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 & 2: Valid assumption of jurisdiction under section 153C and validity/adequacy of the satisfaction note Interpretation and reasoning 2.1 The search under section 132 was conducted in the 'Antriksh Group' on 05.02.2014. A document, being page 19 of Annexure A-3, was seized from the residence of a third party (the searched person). The Assessing Officer of the searched person recorded a satisfaction note that this page 'belongs to' the assessee and contains a receipt of Rs. 75,00,000 having a bearing on the assessee's income. A similar satisfaction note was recorded in the assessee's case and proceedings under section 153C were initiated, culminating in an addition treating the amount as unexplained income. 2.2 The seized document, as reproduced and examined by the Tribunal, was a ledger-type loose sheet containing the notation 'Received from Ajit Singh Rs. 75 lakhs'. The Court found that: - The name of the assessee company did not appear anywhere on the seized page. - The document reflected a transaction between two individuals, namely the searched person and 'Ajit Singh'. - On the face of the document, there was nothing to indicate that it 'belonged to', 'pertained to' or 'related to' the assessee. 2.3 The Assessing Officer sought to establish nexus with the assessee by relying on a letter dated 16.06.2014, stating in the satisfaction note that the assessee had, in that letter filed before the Investigation Wing, accepted the transactions in the seized material through an excel sheet and that entries relating to the assessee matched the seized document. 2.4 The Tribunal, referring to its earlier decision in a connected matter (arising from the same search and same seized materials), noted that: - The letter dated 16.06.2014 was not filed by the present assessee but by entities belonging to the Antriksh Group before the Investigation Wing. - In that letter, the Antriksh Group had owned up the entire transactions recorded in the seized documents and had offered Rs. 13.95 crores as their undisclosed income for a particular assessment year, spread over six group companies. - The assessee in the present case was not part of the Antriksh Group and had not accepted or owned up any of those transactions. 2.5 On these facts, the Tribunal held that: - The statement in the satisfaction note that the assessee had submitted the letter dated 16.06.2014 and accepted the transactions was factually incorrect. - The foundational premise on which the Assessing Officer linked the seized document to the assessee (i.e., alleged acceptance of the transactions through the said letter and matching of entries) was demonstrably false. - No other cogent material or corroborative evidence had been brought on record by the Assessing Officer to show that the document seized from the searched person in fact belonged to, pertained to or related to the assessee. 2.6 The Tribunal also relied on its detailed reasoning in the earlier decision concerning the same search and the same broad set of documents, where it had held that: - Under section 292C, there is a presumption that documents found from the possession of the searched person belong to that person. - Such presumption can be displaced only if the Assessing Officer of the searched person records a satisfaction, supported by cogent material, that the seized material does not belong/pertain/relate to the searched person but instead belongs/pertains/relates to another specific person. - In the analogous case, the Revenue had failed to rebut this presumption; there was no clear naming of the other person in the seized material; and the documents remained 'dumb documents' insofar as that third party was concerned. 2.7 Applying the same reasoning, the Tribunal observed that in the present case also: - The seized page 19 of Annexure A-3 did not contain the assessee's name. - The mere assertion in the satisfaction note that the entries 'relate to' the assessee, without factual support, was insufficient. - The Assessing Officer did not specify in the satisfaction note the precise nature of the alleged transaction vis-à-vis the assessee or how the seized document established any real connection with the assessee. - The presumption that the seized document belonged to the searched person remained unrebutted, in the absence of any independent evidence linking it to the assessee. Conclusions 2.8 The Tribunal held that the Assessing Officer failed to establish, through the satisfaction note or otherwise, that the seized document 'belongs to', 'pertains to' or 'relates to' the assessee. 2.9 It was concluded that the satisfaction note was factually erroneous (due to the incorrect reliance on the letter dated 16.06.2014), vague and lacking in any cogent reasoning or corroborative material to justify invoking section 153C against the assessee. 2.10 Consequently, the jurisdiction assumed under section 153C was invalid, and the addition made based on such seized documents-already acknowledged and taxed in the hands of Antriksh Group companies-could not be sustained in the assessee's hands. The deletion of the addition by the first appellate authority was therefore upheld on this ground. Issue 3: Applicability of the Finance Act, 2015 amendment to section 153C to pre-01.06.2015 searches Legal framework discussed 2.11 The Tribunal noted that section 153C was amended by the Finance Act, 2015 with effect from 01.06.2015, substituting the expression 'belongs or belong to' with 'pertains or pertain to, or any information contained therein relates to', thereby widening the scope of the provision. 2.12 The Tribunal took note of the decision of the Supreme Court in the case of ITO v. Vikram Sujitkumar Bhatia, wherein it was held that the amendment brought to section 153C by the Finance Act, 2015 is to be construed as applicable to searches conducted prior to 01.06.2015 as well. Interpretation and reasoning 2.13 The Tribunal observed that the first appellate authority had earlier applied the pre-amendment requirement (i.e., that the seized document must 'belong to' another person) and had treated the post-2015 amendment as prospective, following earlier High Court precedent. 2.14 In view of the subsequent authoritative pronouncement of the Supreme Court, the Tribunal reversed this specific legal finding of the first appellate authority and held that the amended phraseology 'pertains to or relates to' in section 153C would also govern cases of searches conducted before 01.06.2015. 2.15 However, even after applying the broader, amended standard, the Tribunal found that: - The seized document neither mentioned the assessee's name nor, on its plain reading, indicated any connection with the assessee. - No other material had been brought on record to demonstrate that the document in any manner 'pertains to' the assessee or that 'any information contained therein relates to' the assessee. - The erroneous reliance on the letter dated 16.06.2014, which actually emanated from the Antriksh Group companies and under which those entities had already accepted and offered the relevant income, could not fill this evidentiary gap. Conclusions 2.16 The Tribunal held that, in law, the amended section 153C applies to searches conducted before 01.06.2015, and to that extent the legal view of the first appellate authority was incorrect. 2.17 Nonetheless, on the facts of the case, even applying the widened post-amendment test ('pertains to' or 'relates to'), the jurisdictional preconditions of section 153C were not met, as the Revenue failed to establish any concrete nexus between the seized document and the assessee. 2.18 The Tribunal therefore upheld the deletion of the addition on the factual ground of absence of a valid and substantiated satisfaction under section 153C, while allowing the Revenue's legal ground only to the limited extent of acknowledging the retrospective applicability of the amendment.