TaxTMI 
TaxTMI 
2014 (12) TMI 54
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.... which remained uncomplied with. Fresh notice u/s 153C of Act dated 09.08.2010 was issued to the assessee company, at the new address which was supplied by A.R. of the assessee company, requiring it to file the return for the Assessment Year 2005-06. Return of income for the Assessment Year 2006-07 was filed by the assessee on 23.08.2010 declaring nil. The return filed by the assessee company was the same as that of filed under section 139 of the Act on 15.12.2006. 4. Notices u/s 143(2) and 142(1) along with questionnaire were issued to the assessee by the AO on 06/09/2010, fixing the case for hearing and to furnish necessary details by 20/09/2010. But the assessee failed to furnish any details. In order to complete the assessment proceedings, final notice u/s 142(1) dated 03/11/2010 was issued by the AO to the assessee giving one more opportunity to attend the hearing and furnish necessary details. This notice was also remained uncomplied with. In the event of continuous non-cooperation and keeping in view the limitation in the matter, notice u/s 144 dated 19.11.2010 was issued by the AO, giving the assessee last opportunity to furnish the required details for the completion of....
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...., the A.O. has made addition of (a) Rs. 80,00,000/- on account of the interest receivable from one of the party which was not received in this year but received in the next succeeding year. (b) The AO has made addition on account of interest paid on other loans (i) amounting to Rs. 1,37,38,743/- holding that the assessee in the business of the money lending but it not charging any interest and advances given to its sister concerns whereas use interest on loan received by it from banks and other concerns was paid. Therefore, such interest was not allowable to the assessee. (ii) the assessee has paid an interest of Rs. 13,32,932/-to M/s Kapoor Enterprises whereas from the documents filed by the assessee suggested that the assessee has diverted money to its group concerns, interest paid to M/s. Kapoor Enterprises cannot be allowed as deduction, therefore addition of Rs. 13,32,932/- was made. The total disallowance of interest i.e. Rs. 1,37,38,743/- plus Rs. 13,32,932/- comes to Rs. 1,50,71,675/- whereas the Ld. A.O. has disallowed interest of Rs. 1,51,30,528/- therefore excess disallowance of Rs. 58,853/- was made in addition to what has been disallowed by him earlier. The AO has furt....
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....t therefore out of the total interest paid to Union bank Rs. 76,91,069/- was disallowed. The miscellaneous expenses amounting to Rs. 4,11,582/- debited to the P&L A/c were also disallowed. The AO also disallowed an amount of Rs. 1,62,645/- debited to the P&L a/c as deferred revenue expenditure holding that the income tax act does not recognizes the concept of deferred revenue expenditure. Income as per return Rs.8,63,100.00 Add: Disallowance out of the interest paid to bank Rs.76,91,609.00 Deferred revenue expenditure Rs.1,62,645.00 Disallowance out of the interest paid to persons other than bank Rs.1,96,95,907.00 Loss on non allotment of property being disallowed Rs.36,00,000.00 Rs.3,11,50,161.00 Rs.2,31,50,161.00 Less: Interest charged in Assessment Year 2007-08 Rs.80,00,000.00 Rs.2,40,13,261.00 11. Pursuant to the notice the assessee has filed its return of income for A.Y. 2009-10 on 23.08.2010/30.09.2009 declaring income of Rs. 1,47,88,292/-. While completing the assessment, the A.O. has made addition of Rs. 57,57,700/- by way of disallowing interest paid on other loans includes interest pai....
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....verse as it does not taken into consideration the relevant documents brought on record and submission of the appellant. 4. That CIT(A) has erred on the facts and law in confirming the addition of Rs. 64,12,908/- made by the AO is not allowing the professional and legal charges paid by the appellant. 5. The CIT(A) has erred on the facts and law in confirming the addition of Rs. 2,1 9,250/0- made by the AO in not allowing the lease deed expenses. 6. The CIT(A) has erred on the facts and law in not considering that the expenses of Rs. 64,12,908/- on account of professional and legal charges and of Rs. 2,19,250/- on account of lease deed expenses pertained to business of the appellant and is therefore to be allowed as a eligible business expenditure. 7. The CIT(A) has erred on the facts and law in confirming the addition of Rs. 35,97,905/- made by the AO in not allowing interest expenses. 8. The CIT(A) has erred on the facts and law in not considering that the interest of Rs. 35,97,905/- has been paid by the appellant on loan taken from bank hence the same is to allowed as deduction under the provisions of the Income Tax Act, 1961. 9. The CIT(A) has erred in law in no....
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....see company is that assumption of jurisdiction by the AO before issuing notice u/s 153C of the Act is not in accordance to law and so the subsequent assessment is void-ab-initio and should be quashed being quarum-non-judice. For buttressing the said ground, the ld counsel for the assessee brought to our notice the law laid by the Hon'ble jurisdictional High Court in Pepsi Foods (P) Ltd. Vs. Asstt. CIT(WP(C) No. 415 of 2014 dated 07.08.2014 after examining the provision of Section 153C, 132 (4A)(i) and 292 (i)ii of the Act, the Hon'ble High Court had held as under:- "6. On a plain reading of Section 153C, it is evident that the Assessing Officer of the searched person must be "satisfied" that inter alia any document seized or requisitioned "belongs to" a person other than the searched person. It is only then that the Assessing Officer of the searched person can handover such document to the Assessing Officer having jurisdiction over such other person (other than the searched person). Furthermore, it is only after such handing over that the Assessing Officer of such other person can issue a notice to that person and assess or re-assess his income in accordance with the provisions ....
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....sfaction note, we are unable to discern any "satisfaction" of the kind required under Section 153C of the said Act." 19. In the light of the said ratio-decidendi of the aforesaid order of the Hon'ble High Court, the ld counsel for assessee, submitted that the first step itself has not been fulfilled. So according to the ld counsel, the issuance of notice u/s 153C is illegal. Further it was pointed out by the ld counsel, the from a perusal of the purported satisfaction note recorded by the AO, it can be noted that the Ánnexure-45'which is the Hard Disc containing documents discovered at the premises of "Global Reality ventures Pvt. Ltd"', against which there is no indication whatsoever that the assessment proceedings in the case of Global Reality Ventures Pvt. Ltd were in progress or not, at that point of time and that AO during the course of that proceedings recorded this satisfaction. In order to support this contentions, the ld counsel brought to our notice the order of the co-ordinate bench in V.K. Fiscal Services Pvt. Ltd. Vs. DCIT, Delhi in ITA No.5460-5465/Del/2012 in which the assessee in that case assailed the assumption of jurisdiction of the AO u/s 153C of the A....
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....recording of facts. The entire cash book or the bank book is not available in the hard disk. What was available in the hard disk was confirmation of accounts given by the assessee to Global Reality Ventures and statement of accounts, ledger etc. in support of the same. The relevant portion of the cash book, where the entries of Global Reality Ventures Ltd. are recorded was also there in the hard disk. Thus to hold that the hard disk contains books of accounts of M/s V.K. Fiscal Services P. Ltd. is prima facie wrong. Thus, in our view no money, bullion, jewellery or other valuable articles or books of accounts or documents seized belong to the assessee, warranting issual of notice u/s 153'C'. 11.2. Hence we uphold the contention of the assessee that the issual of notice u/s 153'C', under the facts and circumstances, is bad in law." 20. We also take note of the recent judgement of the Hon'ble jurisdictional High Court in a similar case in Pepsico India Holiday (P) Ltd Vs. ACIT (2014) 50 Taxmann. Com 299 (Delhi), after considering the decisions cited by the Revenue held in para 5 as follows:- "5. While coming to the aforesaid conclusions the court had also examine....
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.... complied with by the Income Tax Officer, Ward-Ill (2), Ahmedabad. A search under Section 132A was carried out and bullion was seized. The case was selected for compulsory scrutiny for six assessment years. The assessee established that the seized silver belongs to M/s Sarvesh Jewellers, Bareilly - the petitioner. The ownership and consignment of the petitioner was also confirmed by the Assessing Officer of the petitioner at Bareilly. The Income Tax Officer, Ward-Ill (2), Ahmedabad did not commit any error in law, in recording the satisfaction note requesting the petitioner's Assessing officer to proceed under Section 153(c) of the LT. Act. 21. After the assessment of the person in respect of whom search action was carried out is completed, the officer under Section 153C, where he find that seized articles belong to some other person, has to forward a satisfaction note to the Assessing Officer on such person. The satisfaction in such case is in respect of the material and disclosures of the person with which the articles or assets are found and not in respect of the person who whom they belong."(Underlining Added) 7. The above extract makes it clear that a taxing statute must....
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....aid Act is that "where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A .... " In view of this phrase, it is necessary that before the provisions of Section 153C of the said Act can be invoked, the Assessing Officer of the searched person must be satisfied that the seized material (which includes documents) does not belong to the person referred to in Section 153A (i.e., the searched person). In the Satisfaction Note, which is the subject matter of these writ petitions, there is nothing therein to indicate that the seized documents do not belong to the Jaipuria Group. This is even apart from the fact that, as we have noted above, there is no disclaimer on the part of the Jaipuria Group insofar as these documents are concerned. 15. Secondly, we may also observe that the finding of photocopies in the possession of a searched person does not necessarily mean and imply that they "belong" to the person who holds the originals. Possession of documents and possession of photocopies of documents a....
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....or books of account or documents belonged to the person other than the person searched. Then the copy of this satisfaction note is to be placed in the file of such other person and the relevant document should also be transferred from the file of the person searched to the file of such other person. Thereafter, in the capacity of the Assessing Officer of such other person, he has to issue the notice u/s 153A read with section 153C. The Assessing Officer of the searched person and such other person may be the same but these are two different assessees and therefore the Assessing Officer has to carry out the dual exercise first as the Assessing Officer of the person searched in which he has to record the satisfaction, during the course of assessment order proceedings of the person searched. We concur with the said view of the coordinate Bench and would like to add that this satisfaction must be an objective satisfaction based on an enquiry by the AO to establish that the documents referred to in section 153C which is found during the search u/s. 132, which are seized or requisitioned belongs to a person other than the person searched; and there should be a clear finding to that effec....