TaxTMI 
TaxTMI 
2014 (5) TMI 109
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.... of any corroborative evidence. 4. That on the facts and circumstances of the case, there is not even an iota of evidence to prove the allegation that the assessee earned any undisclosed income or any expenditure was incurred by him or on his behalf outside the books of accounts as alleged. 5. That Ld. AO has erred by passing his orders using the powers vested under S.153A and 153C when the requisites of the section are not fulfilled in the case of the assessee. The satisfaction as recorded is no satisfaction in the eyes of law and the proceedings initiated on the basis of this satisfaction is void ab-initio and the assessment order made suffers from the incurable defect. The documents seized during survey cannot be used against the assessee as they do not belong to the assessee a pre requisite u/s 153C for making an addition under this section and therefore void ab-initio, illegal and liable to be quashed. 6. That the Ld. AO has erred by relying on documents and statements of third parties Mr. R.K. Miglani and M/s. Radico Khaitan, without opportunity to cross-examine, and on surmises and remises totally alien to any cogen....
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....e additions made by the assessing officer in the assessment framed for the assessment years under consideration. 4. Since the appeals preferred by the assessee involve a legal issue regarding validity of jurisdiction assumed by the AO under section 153C to frame the assessment u/s 153C to frame the assessment u/s 153C read with Section 153A in the context of satisfaction recorded, which goes to the root of the matter, we preferred to adjudicate the same first. 5. The facts in brief are that the assessee company is engaged in the business of manufacture and sale of industrial alcohol, IMFL, Country Liquor, sugar, molasses etc. Search and seizure action u/s 132 of the Act was taken in the case of M/s. Radico Khaitan group of cases. Along-with them search was also conducted at the residence of Shri R.K. Miglani, Secretary General UP Distillery Association (in short UPDA) and at the premises of UPDA on 14.2.2006. Action u/s 133A of the Act was also taken at the premises of the assessee on 14.2.2006. Various incriminating documents were found and seized. Statements of various persons including Shri R.K. Miglani were also recorded u/s 132(4)/133A of the Act. 6. M/s. UPDA is a register....
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....r 752 945 599.4 705.6 3002 14. SSL(Mansurpur) 463 607 374.8 591 2035.8 15. M. Meakins 202 334 204.2 275.6 1015.6 16. Lords(D.K. Modi) 582 616 404.9 486.9 2089.8 17. Balrampur 298 328 244.5 870.5 18. Central (United Spirits Ld.) 22 44 32.4 98.4 19. Majhola 72.5 72.5 8. It was thus alleged that the assessee has paid a sum of Rs. 32007.5 lac during the finance years 2002-03, 2003-04, 2004-05, 2005-06 relevant to the assessment years 2003-04, 2004-05, 2005-06 and 2006-07. 9. The AO of the persons searched recorded a satisfaction u/s 153A on 1.12.2006 that as the assessee has incurred illegal / unaccounted expenditure as stated above, and action u/s 153C of the Act was called for. He delivered the satisfaction note alognwith certified photocopies of the seized documents to the Ld. Deputy Commissioner of Income Tax, Central Circle who was the AO of the assessee being the persons other than the person searched. 10. On receipt of the above records the same were examined and the satisfaction was recorded on 11.12.2006 that provisions u/s 153C of the Act are applicable in the present case. Accordingly notice....
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....dated 20.5.2013 - All Cargo Global Logistics Ltd. vs. DCIT, 137 ITD 287 (SB) - Dinesh Tobacco Industries vs. DCIT (2013) 88 DTR (JD) (Trib) 329 -Shri Vikram Khandelwal vs. DCIT, ITA Nos. 1976 ors./Mumbai/2009 (Asstt. years 2001-02, 2002-03, 2004-05) order dated 18.1.2013 - DSL Properties (P) Ltd. vs. DCIT, ITA No. 1344/Del/2012 (Asstt. year 2004-05) order dated 22.3.2013 13. The Ld. AR submitted that the issue of validity of jurisdiction acquired u/s 153C of the Act on the basis of similar satisfaction recorded by the AO has been decided by the Tribunal in favour of the similarly placed assessees in respect of 12 cases out of 19 parties by the Tribunal in the following cases :- M/s. National Industrial Corporation Ltd. vs. Dy. CIT and ors. ITA Nos. 1658/Delhi/2010 and ors. (asstt. years 2000-01 to 2006-07) order dated 23.11.2012 14. He submitted that proceedings u/s 153C of the Act were initiated in the assessment years 2000-01 to 2005-06 on the basis of satisfaction note recorded by ACIT Central Circle - 4, New Delhi on 11.2.2006 during the search proceedings in the case of UPDA a....
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....was decided in favour of the assessee. He referred contents of para No. 4.2 and 4.3 at page No. 2 to 4 of the written submission filed on behalf of the department that there are good number of documents belonging to the present assessee. He submitted further that the documents have not been considered in the case of Shri Miglani from whose custody these documents were found. Ld. DR submitted that the annexures are part of the records and fax message also belong to the assessee. In this regard, he referred page No. 66 of the paper book filed on behalf of the assessee which is the annexure to the assessment order. He submitted that for framing assessment u/s 153C of the Act it is not necessary that some incriminating material must be found during the course of search. The requirement for initiation of proceedings under the said provisions is that some documents must be there found during the course of search. 17. The Ld. DR submitted that there is no dispute that the satisfaction was recorded by the Assessing Officer qua the documents found and seized during the course of the search. Only dispute is whether in the facts and circumstances of the case the books of account or the docum....
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....sp; 4.1 In the light of the aforesaid discussion in the context of the specific facts of the present appeals questions which arise are; (a) Is there any books of accounts or the documents found & seized in the search which can be exclusively be said to be belonging to Saraya Industries? (b) Is there any books of accounts or the documents found & seized in the search which can be said to be belonging to more than one persons inter alia including the Saraya Industries. If answer to either of the aforesaid two situations is in positive then action u/ s 153C would be maintainable otherwise not. 4.2 Here, it is important to note that the Act even indirectly does not indicate as to what should be the nature of the document seized. Even if prima facie the document is not of the incriminating nature still it can be used to invoke provisions of section 153C of the Act because whether the document is of incriminating nature or not can only be ascertained in the enquiry that follows the issuance of notice u/s 153C.In this connection ready reference can be made of the judgment dt. 29-03-2012 of the jurisdicti....
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....cluding Saraya i.e. the assessee under consideration hence belongs to all including the assessee. 9 & 10. A-2/58 & 59 E Mail message (page 59) from one KP Singh of Radico to S.S. Majithia of Saraya with copy to 3 other persons. Document is specifically addressed to the assessee. Thus, clearly the documents belong to assessee under consideration i.e. Saraya Industries 11-14 A-2/54-57 E Mail message (page 57) from one KP Singh of Radico to S.S. Majithia of Saraya with copy to 3 other persons. Document is specifically addressed to the assessee. Thus, clearly the documents belong to assessee under consideration i.e. Saraya Industries 15-16 A-2/39-40 List of Distilleries Manufacturing Country Liquor containing names of the present assessee & its Key functionaries. Thus, the documents inter alia belongs to the assessee under consideration. 17. A-2/36 Shows details of Daurala Sugar Works, Daurala, a distillery attached with the assessee. The document clearly belongs to Saraya Industries. 18. A-2/35 Country Liquor Dispatch Schedule for December, 2005. The documents belong to 19 persons including the present assessee Saraya Inds 19. A-2/25 C.L. Dispatch figures upto 7th of....
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....s to Saraya Industries especially when he knew that Saraya Industries controls it because it is one of those five core distillery members. * enclosed as Annexure A-3 to this submission hearing page No. 35 to 37 at the bottom On the basis of the above discussion there is no doubt left that present is a case wherein there were many documents found and seized belonging to the assessee and hence proceedings were rightly initiated by the AO u/s 153C of the Act. 4.4 Now the question that may crop up is whether there can be any possibility to hold that the documents belong to UPDA or Miglani. Since in Miglani's case (from whose residence these were found & seized) these have not been considered clearly AO viewed that these document did not as such belong to Mr. Miglani. In this context, it needs to be appreciated that UPDA is merely a body formed by the distilleries for the welfare of its members. Unaccounted payments to the Politicians and the Government officials was to be made by the member distilleries. UPDA was just to facilitate these payment for and behalf of the member distilleries. When it is so the documents likely ....
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....39;s own case and even on the same set of facts for the cause of substantial justice. For the cause of substantial justice it is prayed to kindly consider the matter in proper prospective. 6. Without prejudice to the above, in Annexure A-I to this submission enclosed the operating portion of the Tribunal has been extracted along with the reasons to show as to how these findings/observations of the Tribunal are in-applicable in the context of the present appeal." 19. Ld. DR referred para No. 14 of the order of the Tribunal Bangalore Bench wherein it was observed that neither books of accounts nor document (s) belonging to the assessee were discovered during the search at Miglani's house. Bangalore bench quoted the provisions of section 153C of the Act and thereafter in para 8.12 observed that books / documents belonging to the assessee from Miglani's house were seized nor were they handed over to the AO of CBDL, Bangalore by the AO CC-19, Delhi and hence held that the AO was not justified in taking action u/s 153C of the Act. He submitted that in para No. 8/13, the Bangalore Bench has discussed the decision in the case of P Srinivas Naik vs. ACIT 114 TTJ (Bang) ....
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....e fact that the core members only complied and sent the data and that they emanated from their books becomes clear from the very fact that the fax messages are always to Shri R.K. Miglani and generally not the other way round which go to shown that they were not prepared by UPDA or Shri R.K. Miglani. He submitted that total monthwise / yearwise dispatch of CL in AL found in the seized documents found 100% tallied with the regular books of core committee members / other members of the UPDA which only goes to show that they emanated from the books of members only, which make documents seized from Miglani's house to be belonging to the members of the UPDA only. On the observations of the Tribunal that it could have appreciated the case of the revenue if it was able to lay its hands on any forwarding letter i.e. chit etc. written by the assessee while handing over money to UPDA, Ld. DR drew our attention towards the fact that during the course of survey at the office of the present assessee documents were found and impounded and page No. 13 of the annexure A-2 (party A-9) reveals that the assessee paid a sum of RS. 75 lacs to UPDA in July 2005. This payment is verifiable even from the ....
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....were brought to tax there. Despite its consideration in the hands of UPDA as per the double entry system its effect was necessarily to be taken into account in the hands of those who paid those sums. Thus merely because these documents have been considered in the hands of UPDA does not mean that these documents cease to be belonging to other necessary parties. Further the books of accounts of UPDA does not reflect the type of transactions reflected by these documents seized from Shri Miglani's house which only goes to mean that these documents were not as such belonging to UPDA. Since it acted as facilitator on behalf of the member distilleries these on protective side were considered in the hands of UPDA also. 20. In the rejoinder the Ld. AR submitted that the only issue in dispute is validity of proceedings u/s 153C of the Act in the context of satisfaction recorded by ACIT Central Circle - IV New Delhi. The common satisfaction note was recorded in the case of 19 parties which also included the assessee, Saraya Industries Ltd. . The Tribunal quashed the assessment proceedings in case of number of assesses who were common to same satisfaction note on the ground that various docum....
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....and authenticity of these photocopy documents are not known as these documents were not certified either by ACIT, Central Circle-9, New Delhi who passed the assessment order u/s 153C. He submitted that even otherwise it is not a case of revenue that these annexures were found from the possession of assessee or were in the handwriting of the directors or employees of the assessee. Moreover the contents of all these annexures were of common nature and conclusion of the Tribunal in consolidated order in the case of NICL & Ors. (supra) is fully relevant and applicable. He submitted further that the Ld. DR has enclosed these annexures without pointing out how and in what manner these were considered by AO. In any case these annexures are in the nature of additional evidences and not admissible as per Rule 29 of the ITAT Rules. In support the Ld. AR placed reliance on the decision in the case of DCIT vs. Rohtas Projects Ltd. 282 ITR (AT) 42 (TM). 23. Ld. AR further submitted that the Tribunal is not an investigating agency and has only appellate jurisdiction and as such Tribunal cannot go beyond the grounds and evidences on record. He submitted further that the Ld. DR has merely furnish....
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....se of the assessee in this regard. 25. Considering the above submission we find that the common satisfaction was recorded by the AO for initiation of proceedings u/s 153C of the Act in respect of following 19 parties:- S.No. Name of the Distillery 2002-03 2003-04 2004-05 2005-06 Total (in Lakhs) 1. Saraya 945 1045 527.5 690 (Saraya + Balrampur 3207.5 2. Unnao 804 1134 636.9 889.6 3464.5 3. NIC (National) 327 359 242.4 348.6 1277 4. Narang 61 153 105.1 235.7 554.8 5 & 6. Pikhani & Shamli 214.4 333.1 185 214 947.0 7. Modi 21 125 149.7 308.8 604.5 8. Superior/ITRC 6 46 34.7 233.6 320.3 9. Simbholi 298 472 278.5 583.1 1631.6 10. Cooperative 150 182 99.8 194.8 626.6 11. Kesar(Baheri) 419 317 176.3 245 1157.3 12. Daurala(DCM) 374 453 310.2 448.6 1585.8 13. Rampur 752 945 599.4 705.6 3002 14. SSL(Mansurpur) 463 607 374.8 591 2035.8 15. M. Meakins 202 334 204.2 275.6 1015.6 16. Lords(D.K. Modi) 582 616 404.9 486.9 2089.8 17. Balrampur 298 328 244.5 870.5 18. Central (United Spirits Ld.) 22 44 32.4 98.4 19. Majhola 72.5 72.5....
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....was fixed on the basis of country liquor produced by each distillery. These collections were on regular basis and were given to various officials and politicians which basically represented illegal payments. The whole activities were coordinated through select committee known as "core Committee" and Shri Miglani as Secretary General maintained the regular accounts. The revenue also observed that the assessee has paid a sum of Rs. 3207.5 lac during the financial years 2002-03 to 2005-06 relevant to the assessment years 2003-04, 2004-05, 2004-05, 2005-06 and 2006-07. 27. While examining the seized documents the ACIT Central Circle 4, New Delhi who was the AO of the persons searched viz. M/s. Radico Khaitan, Shri R.K. Miglani, Secretary General UPDA and UPDA, found that these documents seized during the course of search coupled with the contents of the statements of Shri R.K. Miglani revealed that payments were made by various distilleries including the assessee to various public servants including the politicians. The ACIT Central Circle 4, New Delhi recorded satisfaction as per the provisions of section 153A on 1.12.2006 that action u/s 153C of the Act was called for in the present....
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....f UPDA reveals that illegal payments were made by various Distilleries to various public servants. The UPDA acted as the nodal agency for making these illegal payment. The total of such illegal payments which are inadmissible expenditures works out to Rs. 246 crore as per details given hereunder {as understood from annexure A-1 & A-2 seized from the residential premises of Shri R.K. Miglani} :- S.No. Name of the Distillery 2002-03 2003-04 2004-05 2005-06(till Jan.) Total (in Lakhs) 1. Saraya 945 1045 527.5 *690(Saraya + Balrampur 3207.5 2. Rampur 752 945 599.4 705.6 3002 3. SSL(Manurpur) 463 607 374.8 591 2035.8 4. Lords (D.K. Modi) 582 616 404.9 486.9 2089.8 5. Daurala (DCM) 374 453 310.2 448.6 1585.8 6. Kesar (Baheri) 419 317 176.3 245 1157.3 7. NIC (National) 327 359 242.4 348.6 1277 8. Simbholi 298 472 278.5 583.1 1631.6 9. Balrampur 298 328 244.5 870.5 10. Narang 61 153 105.1 235.7 554.8 11. **Pikhani 162 339 185.3 213.6 899.9 12. **Shamli 93 93 13. Cooperative 150 182 99.3 194.8 626.6 14. ***M. Meakins 202 334 204.2 275.6 1015.8 15. Central 2....
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....s paid more than Rs. 10 crores in F.Y. 2002-03 and 2003-04 to M/s. Aneja & Co. as commission / supervision charges. M/s. Aneja & Co. even after including these amounts did not have to pay any tax. (b) M/s. Unmao Distillery has paid more than Rs. 30 Crores as depot charges / expenses to two Delhi based parties, who have paid negligible taxes on this amount. Such charges were not paid till F.Y. 2001-2002. (c) Many distilleries started paying commission on sales, expenses on sales, sales incentives etc. from F.Y. 2002-03 onwards, when these types of payments do not result into corresponding incidence of tax in the hands of the recipients. Sometimes these payments are made to business concerns in non-related business. Shamli and Pilkhani Distilleries, Daurala Distillery, M/s. Lords Distillery have made such types of payments. (d) In most cases, expenses on empty bottles have increased disproportionately since F.Y. 2002-2003. (e) Some of the distilleries like Saraya are paying inflated transportation charges if compared with other distilleries. In view of the above facts based on seized d....
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....e version. It becomes more simple if we conceive these facts as a layman on the basis of our experience, we gather from the society, rather that impression makes our task more difficult and give rise to conflict of thoughts and beliefs. The expression document has been defined in the Indian Evidence Act, to mean any matter expressed or described upon any substance by means of letter, figure, marks or by more than one of these means intended to be used for the purpose of recording that matter. There is no dispute that documents in these appeals were in the handwriting of Mr. Miglani. He is not the employee of any of the assessee. According to our understanding, the presumption of ownership of document could be attached with the person who authored it or with whom it was found i.e. the person who possessed it. All the documents relied upon by the revenue were not emanating from the books of the assessee or in the handwriting of any employee of the assessee. We could appreciate the case of the revenue if it was able to lay its hands on any forwarding letter i.e. chit etc. written by the assessee while handing over the money to UPDA. Any fax message, any e-mail or any audio message rec....
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....hat these were sufficient material to arrive at a satisfaction that these documents were belonging to the assesee to initiate the proceedings u/s 153C of the Act) , we find that the documents in the above cited (DR) table at page No. 14 to 17 were admittedly not found from the possession of the present assesee nor these are in the handwriting of the assessee or its employee(s). These were found from the possession of Shri R.K. Miglani and UPDA about which in case of similarly placed assesses cited above (i.e. NICL & Ors.) the Tribunal has held that there is no evidence of any receipt or payment of cash in respect of which addition was made. In those decisions the Tribunal has also examined and considered the concept of belonging in the context of provisions of section 153C to which we concur with . The word 'belonging' may be understood in the sense of ownership or something little lesser than ownership but of course more than mere reference of assesee on a documents found and seized from the possession of others without any corroboration. These documents noted in satisfaction to proceed u/s 153C do not make reference to any receipt or payment of cash and are not of any incriminati....
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....utstanding in respect of various members of UPDA. Regarding these documents the contention of Ld. DR remained that it is natural that the assessee would hand over its own documents and if the documents were belonging to UPDA, Shri Miglani would not have attributed these documents to assessee especially when he knew that assessee controls it because it is one of those 5 core distilleries members. We find that the pages 47 and 48 of the Annexure are photocopy of two sheets of paper alleged to be cash account related to various parties in respect of which satisfaction was recorded u/s 153C of the Act. These documents were confronted to Shri R.K. Miglani in his statement u/s 132 (4) on 14.2.2006. The statement of Shri R.K. Miglani has been considered by the Tribunal while disposing the appeals of various other parties referred to in these documents and the Tribunal has specifically observed that these documents do not belong to various parties referred to in the said document. We do not find reason to deviate from the decision of Tribunal in those similar cases of NICL & Ors. (supra) relied upon by the Ld. AR. Undisputedly these documents were not found from the possession of the asses....