TaxTMI 
TaxTMI 
TaxTMI 
2015 (11) TMI 1307
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.... of the Act was issued on 7.9.12. The Assessing Officer vide assessment order dated 18.3.2013 assessed taxable income of the assessee by making two additions viz. first addition on account of bogus purchases and second addition on account of notional interest disallowed from expenditure claimed by the assessee under the head of interest on term loan. The assessee preferred an appeal before the CIT(A) agitating the validity of notice u/s 153C of the Act as well as on merit agitating the additions made by the assessee. The CIT(A) granted relief to the assessee on both the grounds on merit and deleted both the said additions. However, the first appellate authority dismissed the legal ground of the assessee upholding the validity of notice u/s 153C of the Act as within valid jurisdiction of the Assessing Officer. Now, the revenue is before this Tribunal agitating the order of the CIT(A) which granted relief to the assessee on both the counts but the assessee has also filed cross objections challenging the conclusion of the CIT(A) which uphold the validity of action and notice u/s 153C of the Act. C.O. No.150/Del/14 3. At the very outset, both the parties are agreed that the C.O. of t....
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....equisite and in absence of such satisfaction proceedings u/s 153C of the Act cannot be initiated against such other person. 4. Learned counsel of the assessee further referred to his written synopsis and submitted that the first requirement of law is that the Assessing Officer of the searched person is required to rebut appeal presumption u/s 132(4A)(i) and u/s 292C(1)(i) that seized documents do not belong or belongs to the searched person and then the Assessing Officer of the searched person has to draw an inference as to whom the seized documents belong to the person other than the person searched. Ld. AR further contended that in the case of Pepsi Food Pvt. Ltd. vs ACIT reported as (2014) 52 Taxmann.com 220(Delhi), the Hon'ble Jurisdictional High Court of Delhi has held that it is for the Assessing Officer of the searched person to rebut the presumption and come to a conclusion or satisfaction that the documents in fact belong to somebody else. There must be cogent material available with the Assessing Officer before he/she arrives at the satisfaction that the seized document does not belong to the searched person but to somebody else and submissions and conjectures of the....
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....been recorded by the Assessing Officer of the other person before issuing notice u/s 153C of the Act and none of the papers belong to or belongs to the assessee have been found during search and seizure operation, then the notice u/s 153C of the Act and none of the papers belong to or belongs to the assessee have been found during search and seizure operation, then the notice u/s 153C of the Act cannot be held as valid assumption of jurisdiction and all proceedings in pursuance thereto should be held as bad in law and void ab initio. 8. Ld. AR further contended that without prejudice to the above legal contentions, it is also submitted that even if, for the sake of arguments but not admitting, it is presumed that the seized documents referred to in satisfaction note were 'belonging to' the assessee and that the Assessing Officer was entitled to issue notice u/s 153C of the Act, even in such a situation, the Assessing Officer was duty bound to close the proceedings after calling off returns u/s 153C of the Act because there is nothing incriminating in the seized documents. To support this contention, ld. AR placed reliance on the judgment of Hon'ble Jurisdictional High Court of....
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....ide the cross objection of the assessee challenging the validity of notice u/s 153C of the Act and all subsequent proceedings held in pursuance thereto. 12. On cross objections, Ld. DR further supported the action of the Assessing Officer and submitted that the CIT(A) rightly dismissed ground no. 1,2, 3, 5 (b) and 6 (b) of the Act upholding the validity of notice u/s 153C of the Act and reassessment order passed u/s 153C r/w section 143(3) of the Act as the Assessing Officer rightly assumed jurisdiction to issue notice u/s 153C of the Act and making reassessment proceedings consequential. 13. On careful consideration of above submissions of both the sides, at the very outset, we may point out that the Assessing Officer issued a notice u/s 153C of the Act on 12.4.12 to the assessee asking to file the return of income for the relevant assessment year after recording reasons for initiation of action u/s 153C of the Act. Ld. AR has placed a copy of the said reasons spread over 4 pages which we are enclosing with this order as Annexure A-1 for the sake of clarity and brevity in our findings and observations. 14. Further, before we proceed to adjudicate the allegation of assessee chal....
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.... satisfaction that the seized document does not belong to the searched person but to somebody else. Surmise and conjecture cannot take the place of "satisfaction". xxxxxxxxxxx 11. It is evident from the above satisfaction note that apart from saying that the documents belonged to the petitioner and that the Assessing Officer is satisfied that it is a fit case for issuance of a notice under Section 153C, there is nothing which would indicate as to how the presumptions which are to be normally raised as indicated above, have been rebutted by the Assessing Officer. Mere use or mention of the word "satisfaction" or the words "I am satisfied" in the order or the note would not meet the requirement of the concept of satisfaction as used in Section 153C of the said Act. The satisfaction note itself must display the reasons or basis for the conclusion that the Assessing Officer of the searched person is satisfied that the seized documents belong to a person other than the searched person. We are afraid, that going through the contents of the satisfaction note, we are unable to discern any "satisfaction" of the kind required under Section 153C of the said Act. 12. This being the po....
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.... 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 are two separate things. While the Jaipuria Group may be the owner of the photocopies of the documents it is quite possible that the originals may be owned by some other person. Unless it is established that the documents in question, whether they be photocopies or originals, do not belong to the searched person, the question of invoking Section 153C of the said Act does not arise. 16. Thirdly, we would also like to make it clear that the assessing officers should not confuse the expression "belongs to" with the expressions "relates to" or "refers to". A registered sale deed, for example, "belongs to" the purchaser of the properly although it obviously "relates to" or "refers to" the vendor. In this example if the purchasers premises are searched and the registered sale deed is ....
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....e judgment of this court in Saraya Industries Ltd. (supra) was relied upon by Mr. Bajpai, in support of his contention that the seizure of the document must be of such nature that even closed assessments for six years could be reopened and this requirement postulates that the provisions of Section 153C can be set in motion only if there is a finding that the seized document or books of account or valuable article represents the undisclosed income of the other person. The said decision does not assist the petitioner. The section merely enables the revenue authorities to investigate into the contents of the document seized, which belongs to a person other than the person searched so that it can be ascertained whether the transaction or the income embedded in the document has been accounted for in the case of the appropriate person. It is aimed at ensuring that income does not escape assessment in the hands of any other person merely because he has not been searched under Section 132 of the Act. It is only a first step to the enquiry, which is to follow. The Assessing Officer who has reached the satisfaction that the document relates to a person other than the searched person can do n....
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....nies, appearing in the said chart." 19. At this point, we may point out that the chart appearing on page 53 & 54 contains detail of projects wherein present assessee i.e. Amrapali Grand has been enlisted at sl. No. 1 and in the other relevant columns, location project wise stage of completion, cost incurred, cost to be incurred, balance amount to be received from cashier, sale value of unsold flats, total receivables and surplus amounts have been mentioned. This chart contains details of 12 companies including the present assessee and title of this chart is mentioned as "Amrapali group, detail of projects". 20. We further observe that in the first para appearing on page no. 2 of the reasons recorded, the Assessing Officer of the other person has noted the details of companies and their managers of Amrapali Group and subsequently it has been mentioned that during the course of search, incriminating documents as to unaccounted cash receipts totalling to Rs. 31.33 crore were seized which have been admitted to be unaccounted by the management of search person/entity, hence surrendered as unexplained income in the books of M/s Ultra Homes Construction (P) Ltd. In para 1& 2 of the reas....
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....en the unaccounted cash receipts have been accounted and surrendered as unexplained income of M/s Ultra Home, we are unable to see any other incriminating material or document etc. which could lead the Assessing Officer of other person to record his satisfaction that documents etc. belong to or belongs to the present assessee (other person) were seized during search and seizure operation on Amrapali group. 21. In view of foregoing discussion, we are unable to hold that the only basis of reasons recorded for action u/s 153C of the Act before the Assessing Officer of the other person i.e. present assessee was a chart containing details of provision of 12 companies of Amrapali Group including present assessee but this chart does not qualify the definition of document belonging to person other than the searched person viz. the present assessee and for initiation of action and issuance of notice u/s 153C of the Act but seizure of document etc. belonging to other person is a prerequisite and in absence of search and seizure operation proceedings u/s 153C of the Act, notice under the said provision cannot be initiated and issued against such other person. At the cost of repetition, when ....
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....l which is, in fact, a chart showing detail of provision of Amrapali group company including name of the present assessee of Amrapali Grand at sl. No.1 but this cannot be held as belong to or belongs to the present assessee. It is further observed that even the Assessing Officer of the other person has not used the words "belong to or belongs to" in the reasons recorded and he has noted that the company wise information appearing in these pages will be treated as document pertaining to all the respective companies appearing in the said chart. Ld. DR has pointed out that as per amended section 153C of the Act, the word 'pertains to' is sufficient for valid assumption of jurisdiction, issuance of notice u/s 153C of the Act. However, we do not agree with this contention of the ld. CIT DR as the present case is relevant to assessment year 2009-10 and the amendment inserted in section 153C of the Act by Finance Act 2015 is applicable w.e.f. 1.6.2015 and onwards which cannot be taken as retrospective for placing word 'pertain to" or "pertains to". Per contra, from the reading of pre-revised section 153C, it is clear that there were words 'belong to' or 'belongs to' a person other than th....
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....sustainable in law. Furthermore, the Hon'ble High Court of Delhi in the case of PCIT vs Kurele Paper Mill Pvt. Ltd. I.T.A. No.369/2015 dated 6.7.15, their lordships held as follows:- "2. The Court finds that the order of the CIT(Appeals) reveals that there is a factual finding that "no incriminating evidence related to share capital issued was found during the course of search as is manifest from the order of the AO." Consequently, it was held that the AO was not justified in invoking Section 68 of the Act for the purposes of making additions on account of share capital." 25. First of all, it would be appropriate to deal with the contention of the ld. DR that in the reasons recorded, the Assessing Officer rightly held the chart showing project wise detail of the Amrapali group of 12 companies including the present assessee pertained to present assessee and thus, the action of the Assessing Officer in issuance of notice u/s 153C of the Act and framing assessment under said provision was quite correct in view of the amendment in section 153C of the Act wherein the words 'pertain to' or 'pertains to' or any information contained therein 'relates to' have been inserted. While w....
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....sing Officer of the other person in the reasons recorded prior to initiation of action and issuance of notice u/s 153C has not recorded that the chart pages 53 & 54 in Annexure A-1 party AB-1, the sole alleged document belong to or belongs to the present assessee. However, the Assessing Officer of the present assessee referring to the said chart has merely mentioned that the company wise non-appearing in these pages will be treated as document pertaining to all the respective companies which is not a proper and valid reason for initiation of action and issuance of notice u/s 153C of the Act. iv) We also observe that except chart pages 53 & 54, there was no other document etc. before the Assessing Officer of the present assessee at the time of recording reasons for initiation of action and issuance of notice u/s 153C of the Act. 27. In the totality of the facts and circumstances and our finding as noted above, about the initiation of action and issuance of notice u/s 153C of the Act, we reach to a logical conclusion that as per proposition laid down by the Jurisdictional High Court of Delhi in the case of Pepsi Food vs ACIT, Pepsico Indi Holdings Pvt. Ltd. vs ACIT (supra) which....
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....resent assessee and on this ground also, the validity of reasons recorded comes within the teeth of proposition laid down by Hon'ble Jurisdictional High Court in the case of Pepsico Holding Pvt. Ltd. (supra) and Pepsi Food Pvt. Ltd. vs CIT (supra). Respectfully following the proposition laid down by Hon'ble Jurisdictional High Court, we are inclined to hold that the reasons recorded for action u/s 153 of the Act and issuance of notice under the said provision was not only bad in law but void ab initio which cannot be held as sustainable and consequently, we quash the same. Accordingly, C.O. of the assessee is hereby allowed. I.T.A. No. 6205/Del/2013 for A.Y. 2009-10 on merits 29. This appeal has been preferred against the same order of Ld. CIT(A) (supra) which upheld the validity of notice and action u/s 153C of the Act. 30. Ground Nos. 1 & 4 are general in nature which need no adjudication. The main grounds raised by the Revenue read as under:- "2. On the facts and the circumstances of the case the Ld. CIT(A) has erred in law in deleting the addition of Rs. 1,12,60,413/- made by AO on account of bogus purchases of raw material. 3. On the facts and the circumstance....
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....M/s Ultra Home Construction Pvt. Ltd. is the flagship company of Amrapali Group and bank finance is raised by this company. This company is also majority partner of the appellant firm. Funds are infused by the partners into the appellant firm for the project, which in turn advances money to the directors of Ultra Home Construction Pvt. Ltd. so that more funds / finances can be raised as the project progresses. The advances made to these persons by the appellant firm were to raise capital for the purpose of business. Therefore, these transactions are not in the nature of loan but in the nature of business advances. The interest payment made by the appellant firm to Bank of Maharastra also does not appear to have any nexus with the money advanced as all the payments are related to the term loan from the bank or various payments to various authorities and all the receipts are from M/s Ultra Home as partner's contribution to the appellant's ongoing project." 35. In view of above, the Ld. AR has placed reliance on the order of Hon'ble High Court of Delhi in the case of Tinbox Co. 260 ITR 637 (Delhi) and submitted that where the firm advanced interest free funds to sister concern, and ....
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....ue of purchase bills effecting the payments through banking channels for commission not actually supported with physical verification of goods. The Ld. DR also pointed out that Shri A. K. Sharma, Director of group company, M/s Ultra Homes in his statement recorded on 9/9/2010, during search and seizure operation, had agreed to surrender huge amounts and hence, when the assessee failed to produce the relevant party (seller) to prove the genuineness of alleged purchase, the A.O was quite correct in making addition in this regard. The Ld. DR vehemently argued that the Ld. CIT(A) granted relief without any basis hence impugned order may be set aside by restoring that of the A.O. 38. Replying to the above, the Ld. Counsel of the assessee strongly supported the order of the Ld. CIT(A) and submitted that the assessee submitted all relevant purchase bills, freight bills and Dharma Kanta Weigh Bills but the A.O simply noted that the assessee failed to produce these alleged vendors, hence he proceeded to make further addition treating the same as bogus purchases without any basis and cogent reasoning which was rightly deleted by the Ld. CIT(A) on the basis of proper appreciation of facts, d....
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.... with an admission made by Sh. Anil Sharma, the Managing Director and main person of the Amrapalli group, during the course of search that the group had engaged in unsubstantiated purchases and his offer to tax of undisclosed income amounting to Rs. 44,87,02,688/- on this count. 5.3 I have carefully considered the case made out by the revenue in the assessment order vis-a-vis the submissions of the appellant and the documents produced before me (also produced before the AO). Admittedly, all the documents required to establish the purchases were produced by the appellant before the AO. However, on failure of the appellant to produce Shree Saraswati Steel Centre, the revenue issued two summons to the said party to enforce attendance, but the summons were returned by post with the remark that the firm had '"left". The appellant was, thereafter, again required to physically produce the party for verification and upon failure to do so the revenue treated the transactions as bogus. However, the moot question here is whether it was in order for the revenue to subsequently require the appellant to produce the party for physical verification? The revenue justifies the adverse view it....
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....e with the AO, could also have been further investigated. None of these courses of action appear to have been taken by the revenue. Instead, addition was made for non- production of the said party. Business relation can be transaction-based, and it is not possible for any business concern to physically produce all the parties with which it may have had transactions in the past. Therefore, the adverse inference drawn by the revenue is pre-mature and without sound basis." 40. At the very outset, we note that the CIT(A) has followed proposition laid down by Hon'ble Jurisdictional High Court (supra) in the case of SSP Aviation Ltd. vs DCIT. We further observe that after detailed discussion on the documentary evidence of the assessee, the Ld. CIT(A) rightly noted that in the eventuality when assessee failed to produce alleged vendors, the appropriate course of action for A.O was to inform VAT authorities about the tax said to be deducted by the sellers so that the deposit of VAT tax could have been verified by them. Simultaneously, the A.O of the vendors could have also been informed about the sales made and to verify whether these sales had been reflected in their respective tax retu....