TaxTMI 
TaxTMI 
2014 (5) TMI 109
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....ee to prove its undisclosed income in the absence 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,....
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....ned the relief given to the assessee by the Ld. CIT(A) by deleting the 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 w....
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.... 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 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 doc....
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....d and no addition was made. The Ld. AR submitted further that no incriminating material was found against the assessee hence assessment u/s 153C of the Act cannot be framed against the assessee. In support he placed reliance on the following decisions :- - ACIT vs. Asha Kataria ITA Nos. 3105, 3106 & 3107/Del/2011 (Asstt. years 2002-03, 2003-04 & 2006-07) order 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 I....
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....2) 346 ITR 177 (Delhi) Orissa State Civil Supplies Corporation Ltd. vs. DCIT 259 ITR 20 (Cuttack) 16. Ld. DR pointed out further that the documents found in search belonging to the present assessee. In the above cited connected cases relied upon by the Ld. AR and decided by the Bangalore and Delhi Benches of the Tribunal, there may not be material against these assessees. Hence it 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 requiremen....
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.... Bench of the Tribunal in the case of Guruprerna Enterprises v. ACIT (ITA No.255, 256, 257/Mum/211 ITA No. 255, 256, 257/Mum/211) where a document being the joint venture agreement found from the premises of a 3rd person (other than the one in whose case action u/ s 153C was taken to which even the assessee was a party) was held to be belonging to, among others, assessee (Guruprerna Enterprises) also. 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....
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....r 2. A-2/67 It gives details of 5 Lead Distilleries and attached Distilleries of Saraya Industries, Lords, NICL, Rampur. Clearly document belongs to five persons including the Assessee under consideration i.e. Saraya Industries. 3. A-2/66 Though unsigned and blank but clearly belongs to 5 persons i.e. Saraya Industries, Lords, NICL, Rampur 4-8 A-2/60-64 Containing list of distillers and other connected details of 16 persons including 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 n....
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....nt recorded u/s 132(4) on *14-02-2006 in answer to question No 19 has clarified that the page 47 contains the cash a/c for the month of Oct. 2 to 3 of expenses attributable to various members of UPDA and that this A/c has been given by Shri Wadhwa of M/s Saraya Distilleries on 11/12/2003. Page 48 is explained to contain the records of balances outstanding in respect of various members of UPDA. Naturally Saraya Industries would hand over its own documents. If the documents were belonging to UPDA, Mr. Miglani would not have attributed these documents 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 ....
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....der does not specifically refer these documents which goes to show that they were not considered and if at all considered they were not not considered in proper perspective. In this respect kind attention is drawn to the decision of the Supreme Court reported in 155 ITR 120 in Distributors (Baroda) P. Ltd. case which was referred/relied by the Cuttak Bench of the Tribunal {259 ITR 29 Cuttack} wherein it was held that in the most deserving case having cogent reasons, Tribunal can apply mind afresh to the matter, irrespective of decision in earlier years in A'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 documen....
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....ttached with the person who authored it or with whom it was found i.e. the person who possessed it. It also observed that all the documents relied upon by the revenue were not emanating from the books of assessee or in the handwriting of any employee of the assessee. On the above finding of the Tribunal the Ld. DR submitted that the documents emanating from the books of the members of the UPDA and more so from the members of the core committee which is clear from the fax message showing their telephone numbers and even names ( A-1/66, A-2/54-57 & A-2/58 & 59). The 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 belongi....
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.... the documents shown details of production, dispatches, collection and payments too have to be held to be belonging to the members whom those concerned. On the observation of the Tribunal in the case of NICL that all the documents have been taxed in the hands of the UPDA also, the Ld. DR submitted that it does not conclude that revenue / AO had viewed that these documents belong to UPDA only. In fact since the payment was given to UPDA for being disbursed to politicians or officials, it was required to be accounted for in the books of UPDA also that is why these 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 th....
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....are fully covered as per consolidated order of the Tribunal, Delhi Bench and Bangalore Bench. There is no dispute that various annexures being part of satisfaction note and proposed to be filed now were found from office and residence of UPDA and Shri R.K. Miglani and assessee has no link or connection with these annexures as these annexures have neither been executed or authenticated by the assessee. He submitted that various annexures being furnished now are only photocopies and in the absence of original documents, these annexures have no evidence value. The source 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 the....
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....s 153C of the Act. There is no dispute that documents were not found from the possession of the assessee nor these were written by the assessee. The issue regarding the validity of initiation of proceedings u/s 153C without acquisition of valid jurisdiction under those provisions has been decided in favour of the assessee in the connected case of DSL Properties (P) Ltd. vs DCIT ITA 1344/Del/2012. He pointed out further that the decision of third member of the Tribunal in the case of DCIT vs. Rohtas Project Ltd. (Supra) is again on identical issue which also supports the case 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....
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....s also taken at the premises of the assessee on the same date. Various 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. UPDA is a registered society formed by the distilleries of UP for its welfare to jointly take up their cause with various authorities on different issues. The assessee was one of the active members of the association. These documents seized from Miglani's residence and from the office of UPDA were regular accounts of money received datewise from the financial year 2002-03 till the date of search i.e. 14.2.2006 and contained basis of determination of this contribution and manner of spending the money. On the basis of these documents and statements of Shri Miglani the revenue came to the conclusion that contribution of each member 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 r....
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..../s. Saraya Industries Limited. Search and seizure actions under section 132 of I.T. Act, 1961 were taken on M/s. Radico Khaitan Limited group of cases and also at the residence of Shri R.L. Miglani, Secretary General of UPDA on 14.2.2006. Simultaneously a survey u/s 133A of the I.T. Act, 1961 was carried out at the office of the UPDA (Uttar Pradesh Distillery Association). Various incriminating documents were found and seized therefrom. Action u/s 153A has been initiated against, various persons including M/s. Radico Khaitan Ltd, and Shri R.K. Miglani. During the course of search various documents were seized / impounded and statements u/s 132(4)/133A were recorded including those of Shri R.K. Miglani. The scrutiny of incriminating documents found at the residence of Shri Miglani and also from the office of 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 sei....
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....ziabad Distilleries are clubbed, though the major production / illegal payments come from Lucknow Distillery operations. ****M/s. Majhola Distillery starated making illegal payments in the F.Y. 2005- 06. These illegal payments to public servants are fixed on the basis of monthly production / sales of different distilleries. The total illegal payment amount is settled with the public servants and then this amount is divided proportionately on the basis of production / sales of different Distilleries. These figures of production / sales reflected in the papers impounded / seized from UPDA headquarters and the residence of its Secretary General Shri R.K. Miglani, in fact, tallies with the actual production / sales shown by different distilleries in their books of a/c, which, in a way indicate that these papers depict the illegal payments made and are not imaginary papers. These distilleries have adopted different methods for siphoning off / generation of this illegal payment amounts. Some of the instances noticed are as under :- (a) M/s. National Industrial Corporation Ltd. (NICL) has paid more tha....
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....annexure A-1, A-2, in common and B-2, B-3 in the case of the assessee. On perusal of these documents, we failed to understand as to how the case of the present assessee stands on different footing than the other 18 assessees in the cases of most of whom the Tribunal on the basis of the same satisfaction note has held the proceeding initiated in those case u/s 153C as invalid. In those cases also Annexures A-1 to A-10 were the subject matter, on consideration of which the Tribunal came to the conclusion that invocation of section 153C was not valid as no incriminating documents belonging to the assesee were found. Relevant para nos. 18, 19 and 20 of the order of the Tribunal in the case of M/s. NICL vs. DCIT and others (supra) are being reproduced hereunder for a ready reference :- "18. According to the revenue, if all the Annexures A-1 to A-10 are looked into in the light of the statement given by their author Shri Miglani, then it reveals that day to day transaction noted on these pages are directly related to the business of the assessee and members of the UPDA. Therefore, there documents were belonged to the assessee. Prima facie, it appears to be very simp....
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....contended by the learned counsel for the assessee that UPDA is an independent taxable entity. It is not a members club and not a mutual benefit society. It is constituted under a separate Memorandum of Association. The Memorandum of Association does not provide that excess of the income shall be paid or transferred directly or indirectly to the members of the society. It also does not provide that on dissolution of the society, assets of the society shall be distributed among the members of the society. Anything belong to the society cannot be said to be belonged to the members. 20. In view of the above discussion, we do not find any reason to differ with the decision of the Co-ordinate bench and make a reference for the constitution of a larger bench. Respectfully following the order of the ITAT, Bangalore, we allow the preliminary grounds raised by the assessee that no documents belonging to the assessee were found and, therefore, no assessment under section 153C of the Act can be framed in their cases. Consequently, all the assessment orders are quashed." 31. When we examine the documents (on which the Ld. DR has sought our attention to support his conte....
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....Majithia of the assessee with copy to three other persons (Annexure A-2/58 and 59) and E.mail message (annexure A-2/54-57) from one Shri K.P. Singh of Radico to assess with copy to three other persons are the documents admittedly addressed to the assessee. Had these documents been faxed or mailed by the assessee, these could have been marked as belonging to the assessee. Similarly the documents bearing "Saraya 2003-04" (marked as annexure A-1/129) contains address of Mohan Meakins and others and there is no reference to any financial transactions of the assessee. The documents marked as annexure A-1/14 & 15 is relating to Balrampur distilleries which as per the Ld. AR is an independent company and the said document is not relevant to the case of the assessee. The document marked as A-4/47 and 48 is the statement recorded u/s 132 (4) on 14.2.2006 of Shri R.K. Miglani where he has made clarification in answer to question No. 19 that the page 47 contains the cash account for the month of October 2 to 3 of expenses attributable to various members of UPDA and that this account has been given to by Shri Wadhwa of the assessee on 11.12.2013 and page 48 is explained to contain records of b....