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2014 (12) TMI 57
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....ri B.K. Dhingra, Smt. Poonam Dhingra and M/s Madhusudan Buildcon (P) Ltd. on 20.10.2008 and during the course of search at their residential premises at F-6/5, Vasant Vihar, New Delhi, certain documents belonging to the assessee were seized. On the basis of documents so found belonging to the assessee company, proceedings were initiated in the cases of the assessee company under Section 153C r/w section 153A of the Act. Initially the case of the assessee company was centralized with ACIT, Central Circle 17 under Section 127 of the Act vide order of CIT(A)- Dehradun-IV, New Delhi dated 14.12.2009. 3. A notice under Section 153Cof the Act was issued to the assessee company to file return for AY 2003-04 to 2008-09 within 15 days of the service of notices. In response to the notice under Section 153C of the Act, the assessee filed a return for six assessment years as required by the Assessing Officer on 8.9.2010. 4. Subsequently, the cases were transferred to Central Circle-21 vide order dated 19.10.2010 passed under Section 127 of the Act. The Assessing Officer rejected the legal contentions of the assessee and made additions pertaining to unexplained purchases under Section 69C....
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....ee that the assessment has been framed in non-confirmation with statutory provisions of Section 143(3) r/w section 153C of the Act, therefore, the CIT(A) erred on facts and law in upholding and confirming the action of the Assessing Officer. 10. Ld. Counsel of the assessee vehemently contended that the CIT(A) has erred in facts and on law in upholding the validity of assessment order, particularly when the assessment has been made without complying with law and additions made are illegal, bad in law and without jurisdiction. On behalf of the assessee, it was also submitted that the CIT(A) was not justified and erred in not considering the fact that the assessment proceedings for all six AYs under appeal were not pending on the date of recording of satisfaction under Section 153C of the Act (on 5.7.2010) and accordingly, the same did not abate for the purpose of initiation of proceedings under Section 153C of the Act and as such the reassessment being bad in law, illegal and without jurisdiction deserves to be quashed. 11. For above submissions and contentions, the assessee has relied on following decisions of Hon'ble High Courts and the Tribunal:- i) Manish Maheshwari ....
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....tted and undisputed facts as noticed by us:- a) original search and seizure operation under Section 132 of the Act was carried out in the cases of Shri B.K. Dhingra, Poonam Dhingra and M/s Madhusudan Buildcon (P) Ltd. on 20.10.2008. b) DCIT, CC-17, New Delhi recorded satisfaction note for issuing notice under Section 153C of the Act to the assessee on 5.7.2010 and notice under Section 153C of the Act was issued to the assessee on 6.7.2010. c) In response to the notice under Section 153C of the Act, the assessee filed returns on 8.9.2010 for all six AYs. 14. At the time of recording satisfaction note on 5.7.2010 and issuing notices under Section 153C of the Act on 06.7.2010, the Assessing Officer of the person searched i.e. Shri B.K. Dhingra and others and the Assessing Officer of the person other than searched i.e. appellant/assessee company in the present cases was the same authority i.e. the assessing officer of the person searched and person other than searched were the same. 15. The main contention of the ld. Counsel of the assessee stress upon the factum that as per RTI reply dated 10.6.2013 by the Assessing Officer of the person searched admitted that no satisf....
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....plete deviation in the new provision in as much as while Section 158BD provided for transfer of file only when the Assessing Officer who conducted the search or who called for books of accounts was satisfied that the undisclosed income found therefrom belongs to any person other than the searched assessee who has to be assessed under Section 158BD read with Section 158BC, under Section 153C of the Act for transferring the material or evidence collected in search to the Assessing Officer of an assessee other than the searched assessee, what is required to be satisfied is that the money, bullion, jewellery or other valuable article or thing or books of account or documents seized in the course of search of an assessee belong to or relate to a person other than the searched assessee. In other words, unlike under Section 158BD for transferring a file under Section 153C, there is no need to examine whether the books of accounts or other evidence or materials seized in the course of search of an assessee represents or proves undisclosed income of another assessee. On the other hand, for transferring the file to the Assessing Officer of such other assessee, all what is required to be cons....
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....icer after hearing the assessee to consider such materials or evidence for assessment. So much so, we do not think any enquiry or hearing or adjudication is contemplated by the Assessing Officer, who conducted the search of an assessee in which evidence or materials belonging to another assessee is obtained for transferring the file to the Assessing Officer before whom such other assessee is to be assessed. Even though transfer as contemplated under Section 153C has to be made by the Officer who conducted the search and who recovered books of accounts, materials or articles in the course of search of an assessee other than searched assessee, still it is open to such assessee to establish before his Assessing Officer that the opinion of the Assessing Officer transferring the materials or evidence or books of accounts or goods seized is wrong and that those do not belong to him. In other words, the transfer of recovered books of accounts, evidence or materials is only a procedural formality to be complied with by the Assessing Officer who searched an assessee and recovered materials pertaining to another assessee, and the Assessing Officer who takes up assessment under Section 153C a....
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.... present case, we observe that the CIT(A) has dismissed the legal contention and grounds of the assessee with following observations and conclusion:- "8. I have considered the assessment order, written submissions, remand report and rejoinder to the remand report filed by the AR as well as the facts of the case and the position of law. It is noted that in Grounds of Appeal No.1, 2, 3 & 5 the appellant has raised the issue that proceedings u/s 153C initiated in its case on the satisfaction note not based on any incriminating material is bad in law as also the fact that initiation of proceedings u/s 153C should be in respect of such yearsin which there is some material. That therefore even on these grounds the assessment order is bad in law. In this connection the appellant has, placed reliance on the decisions in cases of VJM VIMAWAL (2009) 124 TTJ 508 (UR) Ahmedabad, Saraya Industries Ltd., 306 ITR 189 (2008) Delhi etc. I have gone through the satisfaction note of the .4.0 dated 05.07.2010. It is seen that the AO has noted as under: "Documents at pages 77 to 161 of Annexure A-24, seized by party R-2 from the premises at F-615, Vasant Vihar, New Delhi during the course of sear....
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....e action of the AO in this respect as is being made out by the appellant. Now coming back to the issue of limitation raised by the appellant in the above said grounds of Appeal no. 1, 2, 3 & 5 it has been argued that while search has taken place in the group case in October 2008 but the documents are deemed to be handed over to the AO of the appellant on 05th July 2010, the date on which the notice u/s 153C has been issued in the appellant's case. That six years which can be assessed u/s 153C shall have to be construed from the date on which the books of account or documents are handed over by the AO of the main party subjected to the search to the AO of the other person (the applicant in this case). That accordingly the six years which can be assessed u/s 153C in applicant's case are A.Y 2005-06 to 2010-11. The above view is clear on reading the proviso to sec 153C(1) r. w. s. 153A(1) of the IT Act. In this connection reliance is also placed in the ratio of decision in the case of VJM Vimawal vs ACIT 124 TTJ 508 (UR). Accordingly the initiation of the proceedings for AY. 03-04(and the other respective A.Y's as the case may be) which has been made on 05.07.2010 is barre....
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....at the money, bullion, jewellery or other valuable article or thing or books of accounts or documents seized in the course of search of an assessee belonged to or related to a person other than the person searched. In simpler words unlike section 158BD of the Act for transferring a file under Section 153C of the Act, there is no need to examine whether the material, documents, books of accounts or other evidence seized during the course of search of an assessee represents or disclosed undisclosed income of another assessee. 22. In the decision of the Hon'ble Supreme Court in the cases of Calcutta Knitwears (supra), the ratio laid down in the case reads thus:- "38. Having said that, let us revert to discussion of Section 158BD of the Act. The said provision is a machinery provision and inserted in the statute book for the purpose of carrying out assessments of a person other than the searched person under Sections 132 or 132A of the Act. Under Section 158BD of the Act, if an officer is satisfied that there exists any undisclosed income which may belong to a other person other than the searched person under Sections 132 or 132A of the Act, after recording such satisfaction,....
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....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 of Section 153A. Therefore, before a notice under Section 153C can be issued two steps have to be taken. The first step is that the Assessing Officer of the person who is searched must arrive at a clear satisfaction that a document seized from him does not belong to him but to some other person. The second step is - after suchsatisfaction is arrived at - that the document is handed over to the Assessing Officer of the person to whom the said document "belongs". In the present cases it has been urged on behalf of the petitioner that the first step itself has not been fulfilled. For this purpose it would be necessary to examine the provisions of presumptions as indicated above. Section 132(4A)(i) clearly stipulates that when inter alia any docum....
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....son other than person searched is a sine qua non for initiating action u/s 153C. In S. 158BD, AO of person searched is to be satisfied that any undisclosed income belong to any person other than person searched, while, in case of S. 153C, AO of person searched is to be satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents belong to person other than person searched. Perusal of satisfaction note shows that paper does not indicate in whose case this satisfaction was recorded and who is officer recording satisfaction. Neither name of assessee of AO was mentioned and no seal of AO was there. AO recorded satisfaction in case of such other person which does not satisfy condition of assuming jurisdiction u/s, 153C. Moreover, no original satisfaction note is available on record. Photocopy of satisfaction note produced before us does not bear name of any assessee, name of AO or any seal of AO. Therefore, satisfaction note cannot be said to be valid satisfaction note within meaning of S. 153C. Likewise, AO issued notice u/s 153C for AY 2004-05 which is clearly barred by limitation. Therefore, issue of notice u/s 153C issued by Revenu....
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....urther action of the proceedings for AY 2009-10 but this exercise was not conducted prior to issuance of notice u/s 153C of the Act, on 6.7.2010, hence, the initiation of proceedings and assumption of jurisdiction u/s 153C of the Act gets vitiated on account of non-recording of required satisfaction by the AO of the person searched and non application of mind by the AO of the person other than the person searched. 28. Relying on the decisions of ITAT, Delhi in the case of DSL Properties Ltd. (supra) and V.K. Fiscal Services Pvt. Ltd. (supra), ld. Counsel of the assessee has also advanced another legal contention that the assessment for AY 2003-04 and AY 2004-05 is time barred as per provisions of section 153(1) of the Act which stipulated that the Assessing Officer can issue the notice u/s 153A of the Act for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted and for the purpose of section 153C of the Act for the six assessment years immediately preceding the assessment year relevant to the previous year in which the document or material is handed over. 29. Replying to the above, ld. DR pointed out the obs....
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....ant and the same reads as under: "13. Applying the above case laws to the facts of the case, we have to necessarily quash the assessment proceedings for AY 2004-2005, 2005-06, 2007-08, 2008-09 on the following grounds. (a) No books of accounts belonging to the assessee were found and seized in the premises of the other person. What was found was in the hard disk was only a confirmation of account that an attached annexures. Such documents cannot be said to be books of accounts or documents belonging to the assessee. (b) The Revenue has not produced the record of the searched person to demonstrate that satisfaction was recorded during the course of assessment proceedings in the case of M/s. Global Reality Ventures P. Ltd. On the date of recording of satisfaction, first notice u/s 153(c) was issued. There is no indication whatsoever, that the assessment proceedings in the case of Global Reality Ventures P. Ltd were in progress or not, at the point of time and that the AO during the course of that proceedings recorded this satisfaction. The procedure contemplated under the Act was not followed. (c) The satisfaction is recorded on 23rd July, 2010. The relevant AY would be 2....
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....6 32. In view of above, we are inclined to hold that the Assessing Officer has issued notice under Section 153C of the Act dated 5.7.2010 for AY 2003-04 and 2004-05 on 6.7.2010 which is clearly barred by limitation. Therefore, the issue of notice under Section 153C of the Act by the revenue cannot be sustained because it is legally not valid as the conditions laid down for valid assumption of jurisdiction u/s 153C of the Act have not been fulfilled and the same is barred by limitation for AY 2003-04 and 2004-05. In view of above discussion, we quash the notice issued under Section 153C of the Act and consequently, the assessment completed in pursuance to such notice are also quashed for AY 2003-04 and 2004-05 as the same are barred by limitation and also not initiated properly without having valid assumption of jurisdiction as required u/s 153C of the Act. 33. Ld. Counsel of the assessee has also pointed out that as per revenue, the only document which was found during the search and seizure operation on Shri B.K. Dhingra and others is a cheque book which pertains to AY 2009-10 for which no assessment was made under Section 143(3) of the Act as the transactions reflected from....
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.... or material is handed over, six assessment years immediately preceding the assessment year relevant to the previous year in which the document or material is handed over. 36. However, admittedly, the only document which was found related to the present appellant assessee was cheque book related to the assessment year 2009-10 and the ld. DR has not disputed the fact that the same was duly recorded in the books of accounts of the assessee and, therefore, by any stretch of imagination, the said cheque book cannot be said to be an incriminating material. But the Assessing Officer of the present assessee i. e the person other than the person searched has not examined and rather ignored above important fact before issuing notice u/s 153C of the Act. 37. We also find it appropriate to mention that it must not be lost sight of that section 153C of the Act and 158BD of the Act are draconian in nature when accounts of the person or entity other than the person searched are reopened automatically and revenue gets authority to assessee or reassess assessment of six assessment years preceding previous year in which seized material or evidence belonged to the person other than the person ....
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....RTI reply dated 10.6.2013 by the Assessing Officer of the searched person, no satisfaction note in the case or person or entity searched was recorded which is also apparent from the cursory look on the available satisfaction note being recorded by the Assessing Officer of the assessee. Ld. DR replied that as the Assessing Officer of the person searched and Assessing Officer of the person other than searched was the same, then there was no occasion of taking over or handing over of material or evidence and when the satisfaction can be easily inferred from the records and note sheet entries, then there is no need to record satisfaction in the record of person searched. The DR pointed out that it is necessary for the person objecting the validity of the Assessing Officer to demonstrate prejudice suffered by it and merely technicalities and irregularities which do not occasion or cause failure of justice are not allowed to defeat the ends of justice. To support above contention, ld. DR has relied on the decision of Hon'ble Bombay High Court in the case of Shirish Delvi vs ACIT (supra) and decision of Hon'ble Supreme Court in the case of State Bank of Patiala vs S.K. Sharma (sup....
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....y are rejected." 42. In this letter, the ACIT has mentioned that as the ACIT, Central Circle 21/17, New Delhi was assessing the person covered u/s 132 of the Act and the notice under Section 153C of the Act was also issued by the same Assessing Officer, then there was no need to transfer the books of accounts/documents to any other officer. In this letter, the ACIT has also mentioned that thereafter jurisdiction over the case of the present appellant assessee has been vested with the ACIT, CC-21 by virtue of order under Section 127 dated 19.10.2010 passed by CIT, Central-II, New Delhi. At the cost of repetition, we find it appropriate to elaborate our findings that as we have already observed that as per recent decisions of Hon'ble Jurisdictional High Court of Delhi in the case of Pepsico Holdings Pvt. Ltd. (supra) and Pepsi Foods (supra) and decision of ITAT Delhi in the case of DSL Properties (supra), we clearly note that recording of satisfaction by the AO of the person searched is sine qua non. 43. In the present case, we have already held that the AO of the person searched had not recorded any satisfaction note. The AO of the person other than person searched recorde....
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....resent case the fact that the whole of the purchases of various amounts respectively involved in each of the assessment years in question have been duly accounted for by the appellant in its books of accounts has not been challenged or questioned and more particularly when the books of accounts have not been rejected by the f7.0, no question of disallowance of purchases u/s 69C arises. The judgement in the case of CIT Vs M/s Radhika Creation ITA No. 692/2009 by Hon'ble Delhi High Court is applicable to the present facts of the case as all the purchases are accounted in the regular books, the source is obviously explained. The provisions of sec .69C are not applicable as there was no unaccounted expenditure. It is also an admitted fact that complete books of accounts were also produced before the AO and the same were examined. No defect was pointed out. Thus, the same stood accepted by the AO. It is settled law, that books of account maintained in the normal course of business are evidence under the 'Evidence Act' and Income Tax Act. It is admitted fact that the books of account were produced before the Sales Tax officer ward 101, New Delhi during the assessment proceedi....
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....t of purchases. Accordingly, we are inclined to hold that the Assessing Officer made addition on wrong premises which was rightly corrected by the CIT(A) deleting the impugned additions. We are unable to see any valid reason to interfere with the same, hence, ground no. 1 of the revenue is dismissed. Ground no. 2 48. Apropos ground no.2 of the revenue, from the impugned order we observe that the CIT(A) deleted the addition made by the Assessing Officer pertaining to the amount of sales with following findings and conclusions:- "26. I have considered the assessment order, written submissions, remand report and rejoinder to the remand report filed by the AR as well as the facts of the case and the position of law. I have observed that as all the sales have been recorded in the books of accounts the same including sales and purchase vouchers and stock registers maintained on day to day basis were produced before the AO which was duly examined by .him. No negative observation was confronted to the appellant. Complete names and addresses of the parties to whom goods were sold were available with the AO. Most of the customers were assessed to income tax. The part of sales were m....
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....rvation that the sales represent income from undisclosed sources on the basis of conjecture & surmises. In view of this position the ground of appeal no 10 raised by the appellant is allowed." 49. Ld. DR supporting the assessment order submitted that the Assessing Officer made addition by disallowing entire sales which was income of the assessee form undisclosed sources. Ld. DR further contended that the CIT(A) deleted the addition without any basis by taking a hyper technical approach. Ld. DR, therefore, submitted that the impugned order may be set aside by restoring that of the Assessing Officer. 50. Ld. AR contended that when the revenue has accepted the amount of opening stock and the purchases made by the assessee during the year, then the sales cannot be doubted. The AR further contended that the Assessing Officer was not justified in observing that the entire sales of the assessee represented its income from undisclosed sources. The AR supported the impugned order and submitted that the Assessing Officer made addition without any justified and cogent reason which was rightly deleted by the CIT(A). 51. On careful consideration of impugned order in the light of conten....
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....8-09 5,05,706/- Accordingly the AO is directed to delete the addition for the A.Y. 2003-04 to 2008-09, details hereinabove made on this account. Regarding allowance of depreciation the AO is, directed to allow the same as per Income Tax Act /Rules. This ground is therefore allowed in favour of the appellant company." 53. Ld. DR submitted that when the expense claimed by the assessee company in the P&L account were unverifiable from the records and bills and vouchers, then the Assessing Officer had no option but to disallow entire amount of claimed expenses and depreciation.. Ld. DR submitted that the impugned order may be set aside by restoring that of the Assessing Officer. 54. Replying to the above contention of the ld. DR, ld. Counsel of the assessee submitted that when the books of accounts of the assessee company are duly audited under the provisions of the Companies Act and there is no negative observation in the auditor's report, then the claim of expenses and depreciation cannot be doubted. Ld. Counsel for the assessee also pointed out that the entire books of accounts were produced before the Assessing Officer and the same were examined by him and no defici....