AI Drafter 
TaxTMI 
TaxTMI 
2011 (4) TMI 1339
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.... in holding that the reference for special audit u/s 142(2A) was valid and the assessment made consequent thereto was valid in law. 3. The ld CIT(A) erred in holding that the appellant trust was not entitled to the exemption u/s 11 and the income was taxable in the hands of the appellant. 4. The ld CIT(A) erred in holding that the activities of the assessee trust were covered under the provisions of section 10(23C) and accordingly, the claim of exemption of the assessee could be entertained only u/s 10(23C)(vi) and not u/s 11-13. 5. The ld CIT(A) erred in holding that the assessee trust has violated the provisions of section 13(1)(d) by investing the funds in the modes other than those prescribed in section 11(5) and hence, the exemption u/s 11 was not allowable. 6. The ld CIT(A) erred in holding that the assessee trust has violated the provisions of section 13(1)(c). 7. The ld CIT(A) erred in holding that the assessee trust was charging some capitation fee for admissions to the students without appreciating the correct facts of the case. 8. The ld CIT(A) erred in holding that the cash and the loose papers found with Shri Shinde belonged to the appellant and not t....
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....nt years 2005-06. The objections relating to notice under section 153C are not acceptable the AO and the reasons in this regard are discussed in the following paragraphs. Copy of the satisfaction note as provided to the assessee vide letter No PN/DCIT/CC2(2)153CC/07-08/334 on 10.10.2007 are discussed in the subsequent paragraphs of this order. In the light of the above note supplied to the assessee, the assessee raised various objections to the issuance of the notices u/s 153C of the Act for A.Y 2000-01 to 20005-06, vide letter Ref. No: BV/CO/2008-09, dated 24.7.08. The same as extracted by the CIT(A) is reproduced as below. "In this case, Your Honour has issued us notice u/s 153C in pursuance of the search on Shri R. D. Shinde. Your Honour has given us the satisfaction note wherein your Honour has referred to the documents relating to the assessee found with Shri R.D. Shinde. Accordingly, your Honour is of the opinion that since various documents seized from Shri R. D. Shinde pertain to the assessee, the notice u/s 153C is valid. The assessee submits that there is no justification for issue of notice u/s 153C. In view of provisions of section 153C where any money, bullion, jewe....
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.... not stated in clear terms that the amount is deposited and he has only raised an apprehension. Secondly, he has not mentioned that the name of the trust in which the amount is deposited. There are number of charitable trusts whose documents are founded with him. Accordingly, the notice issued to the assessee is purely on presumption and surmises and hence, we submit that the notice u/s153C is not justified and therefore, the proceedings initiated may kindly be dropped. We hope the explanation submitted by us are the genuine reasons to enable you to drop the proceedings initiated in our case for the above years." 4. Thus, it is the case of the assessee that no material pertaining to the assessee was found and seized and if anything was seized the same is not incriminating. During the assessment proceedings, AO found that there are various documents seized and came to the conclusion that the seizure of documents is enough for issue of the notice u/s 153C of the Act and incrimination of the same is not needed as per the said provisions. Further, as per AO, the relationship between the persons searched i.e. Shri R.D. Shinde and the assessee is very well established and there is ....
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....cific incriminating seized documents. He is of the opinion mere the close connection between the persons searched and the assessee is adequate assume jurisdiction u/s 153C of the Act. He has also quoted the notings from loose paper seized vide bundle no. 2 of panchnama dated 21.7.2005, wherein figures of huge collections in lakhs are noted, all of which was made the basis of admission for capitation fee of more than 9 crores in A.Y 2006-07. Satisfaction itself was claimed to be sufficient and speaking to establish the validity of the proceeding initiated u/s 153C. The defence of the assessee that the money and documents seized belonged to Shri Shinde as he has owned them up and the appellant had no knowledge or complicity to the said affairs of collecting money for admissions, were held not acceptable in view of many reasons including the facts that the assessee had close relations with Shri Shinde. To establish this, the AO has referred to facts and arguments which are already noted in para 5 of this order and are not being repeated again. The defence taken by the appellant to plead its ignorance or non involvement in the said collection of money for admission, on the ground that ....
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....ere is no justification for issue of notice u/s 153C. Section 153C states that where any money, bullion, jewellery or valuable article or thing or books of accounts or documents seized belong to a person other than the person referred to section in 153A, then notice u/s 153C can b issued to the person whose books of accounts, etc. are seized. The assessee submits that the documents found with Shri Shinde which are mentioned in the satisfaction note recorded by the ld AO are not incriminating documents but they are the documents for the transactions which are duly accounted by the assessee trust in its books and therefore, there was o reason to issue notice to the assessee u/s 153C. The assessee contends that where regular documents which are accounted and can be verified are seized, then no notice u/s 153C can be issued. We had also given a chart explaining the papers is submitted. No incriminating material was found pertaining to the assessee during the search on Shri Shinde. Hence, we submit that the notice issued u/s 153C is not valid at all since no incriminating evidence has been found pertaining to the assessee. Accordingly, we submit that the notice u/s 153C is not valid and....
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....eized during the course of the search in the case of Shri R D Shinde. The objections raised y the assessee are the same as those which were raised during the assessm3nt proceedings. These have been considered and rejected by the AO in para 2.40 on page 23 to para 2.52 on page 32. These are not repeated here. In view of the discussion in these paras, the assessee's objections deserve to be rejected. Additions are made in respect of issues wherein no incriminating evidence has been found during search: It is the assessee's contention that in an order passed u/s 153C, the additions that are to be made are only those which are based on incriminating documents found during the search. It is the assessee's contention that none of the additions made in its case are based on documents found during the course of the search. The assessee's contentions are factually and legally incorrect. There is no stipulation in section 153C that in an assessment made under the said section, the income assessed should be based solely on incriminating documents found during the course of the search. That was the case in respect of the concealed income that was required to be computed under the earlier....
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....lloys P Ltd (124 TTJ 674 (Jodh) d. Shri Gangadhar D Kshirsagar (ITA No 1042 to 1048/Pn/08 15) Finally, the ld AO has stated that the contention of the assessee that no addition can be made u/s 153C when no incriminating evidence is found is not justified. According to him, there is no requirement that u/s 153C, the income should be assessed solely on the basis of incriminating evidence found during search. Secondly, he has stated that certain additions are made on the basis of evidence found during search. The assessee submits that in the asst. u/s 153C r.w.s. 153A, the addition can be made only on the basis of incriminating evidence found during search. Since in this case, the ld AO has not pointed out the incriminating evidence found in the course of search, the assessee submits that the additions made are not justified. We have already clarified the legal position in our submissions. Secondly, the AO has only stated that certain additions are made on the basis of evidence found during search. He has not elaborated as to which incriminating evidence was found which has resulted in the addition. Thus, the assessee submits that no incriminating evidence was found and hence, t....
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....collection and cash deposits in the bank accounts relating to Imarat and other funds. The appellant is always in denial mode on the strength of statement of Shri Shinde saying that it represents his consultancy income, carried out clandestinely without the knowledge of the appellant trust. The strategy of the appellant, seem to be to repeat the same argument again and again that these evidences do not belong to them. I have dealt this issue in detail in para 5 to say why it should be held to be belonging to appellant and for capitation fees. Consistent denial of such strong evidences with total disregard to the arguments made by the AO cannot help the appellant in coming out of the implications that it entails. As this aspect has already been dealt in detail in para 5 of this order, where after evaluating all the evidences and arguments advanced by both the sides, it has been held that in the facts and the circumstances of the case and in law, it is established that the same belong to appellant and not Mr Shinde, this art of the argument of the appellant on the issue of validity of initiation of s. 153 is held invalid and is accordingly dismissed. 7.6.2 In addition to the above,....
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.... the contents of the said documents are accounted in the regular books of accounts of the assessee; (iii) most of the documents seized relate to the current AY, which is not the subject matter of discussion for the AYs under consideration; (iv) there are none pertaining to many of the AYs; (v) only document relating to the AY 2005-06 is the ledger with the names of the students under the management quota, which are other undisputedly recorded in the concerned books of the assessee and there is no undisclosed about the said ledger. Referring to the names appearing in the said ledger (Inward Register), Ld counsel mentioned that these are obviously accounted names and there are not any unaccounted students which is an impossibility; (vi) this ledger does not contain any financial transactions; (vii) Ld counsel filed a copy of the order of the Tribunal of Pune Bench in the case of the Sinhgad Technical Educational Society (supra) and mentioned that where there is no material seized by the revenue relating to the assessee and where there is no incriminating documents, the assessment/concluded assessment must not be reopened or disturbed. Where there is seizure of any documents, the conc....
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....nd the need of examining the scope of the issue, the details of the seized documents found place in the satisfaction note, relevant commentary on such each and every documents etc. So far as the scope is concerned, we find that the same was examined in the cases of Kumar & Co and the Sinhgad Technical Education Society (supra) relied upon by the Ld Counsel for the assessee and the Tribunal of this Bench has come to the conclusion that the AO shall not possess unfettered powers of summarily opining or reopening the concluded assessments of all the six assessment years in respect of the third party mentioned in section 153A of the Act without having in possession the AY-specific incriminating documents. We proceed to import relevant portions of an unreported decision of the Tribunal of this bench in the case of Sinhgad Technical Education Society Vide ITA NO 114 to 117/pn/10. 15. Extraction of paragraphs 8 to 15 from the order of the Sinhgad Technical Education Society vide ITA NO 114 to 117/pn/10. "8. Additional Ground: Invalid Notices U/s 153C: In this regard, we have perused the reasons recorded by the AO of the assessee. We find that there exists the reasons for issue of no....
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....STES on or before 25.06.2005. Bundle no. A-4 8) page no. 50 & 54 - these pages contains the details of staff arrangements made by the STES college of Engineering for admission process for F.Y. 2003-04. 9) page no. 58 to 60- these pages contain the details of expenses incurred by STES." 10. From the above, it is demonstrated by the Ld Counsel that the items at sl no 1 to 5 above belongs to the AY 2004-05 or thereafter. Referring to the rest of the items at sl 6 to 9 above, the Counsel mentioned the said documents seized are either recorded in the books of account or involves cheque transactions. Thus, he summed up stating that the documents in question are neither the incriminating ones nor unaccounted transactions of the assessee and nor they relate to the impugned four AYs. In such circumstances, the AO not only assumed jurisdiction invalidly but also erred in disturbing the settled and completed assessments. Accordingly, AO should not assume jurisdiction in respect of such AYs in the absence of any incriminating information or transactions specific to any of the impugned four AYs ie 2000-01 to 2003-04. The contrary argument from the side of the revenue is that the ove....
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....) of the Act, such document cannot be said to be containing the incriminating information. What is the point in disturbing the settled assessment when the revenue does not have incriminating information for an AY and the information what is available is only routine one and when the AO merely makes an addition in the assessment u/s 153C based on change of opinion and when such additions are likely to be deleted in view of the settled nature of the issues? Income Tax provisions are not merely for the issue of notice u/s 153C but it is essentially for taxing the income of the person. What is point in issuing notice u/s 153C on flimsy grounds and finally tax nothing? Such proceedings only creates avoidable nuisance both to the over-burdened taxman and the much hazzled taxpayers. In the instant case, provisions of section 153C are invoked merely to apply the provisions of section 45(4) in this year, the issue which was already examined and concluded as inapplicable to the facts of the case. Such issue of notice is unwarranted and such reopening of the assessment for the AY 2000-01 is uncalled for. 26. Therefore, the proceedings initiated u/s 153C is not valid in view of the decision....
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....he incriminating nature of the same is out of question. Therefore, reliance of the DR on the said case is misplaced. 13. Further, we have examined various other judicial propositions mentioned by the Ld Counsel and some of them are reproduced as under. 1) Anil Kumar Bhatia & Ors. (2010) 1 ITR (Trib) 484 (Del) Conclusion:- "In respect of an assessment under s. 153A, where processing returns under s. 143(1)(a) stood completed in respect of returns filed in due course before search and no material is found in search thereafter, no addition can be made." 2) Suncity Alloys (P) Ltd. (2009) 124 TTJ (Jd) 674 Conclusion:- "Assessments or reassessments made pursuant to notice under s. 153A are not de novo assessment and therefore no new claim of deduction or allowance can be made by assessee where admittedly the regular assessments are shown as completed assessments on the date of initiation of action under s. 132." 3) Meghmani Organics Ltd. (2010) 129 TTJ (Ahd) 255 Conclusion:- "Record maintained by a person for his own purpose though referable to the assessee cannot be said to be belonging to the assessee within the meaning of s. 153C. Further, where none of the assessments are....
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....e Assessing Officer on 18/04/2007, this assessment was not pending. Attending to these arguments of the counsel is superfluous and merely an academic exercise as we have upheld the applicability of the decision of the Tribunal in the case of LMJ International Ltd (supra) for the proposition that the "where nothing incriminating is found in the course of search relating to any assessment years, the assessments for such years cannot be distributed" and other local decision cited above. Accordingly, the additional ground raised by the assessee for all the four appeals under consideration are allowed and in favour of the assessee. 15. As the additional ground for all the four years are allowed in favour of the assessee, we are of the considered opinion the adjudication of the grounds relating to the merits of the additions is merely an academic exercise. Therefore, the relevant grounds in all the four appeals are dismissed as academic." 16. From the above, it is the decision of this bench of the Tribunal, taken relying on the decisions of the other benches of the Tribunal ie in the case of LMJ International Ltd (supra) that "where nothing incriminating is found in the course of s....
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.... by Bharati Vidyapeeth, Pune Bundle No A-2 Page No 94 to 98:- Bills of diesel expenses of Bharati Vidyapeeth, Pune Bundle No A-2 Page No 101 to 106 :- Expenditure details of Bharati Vidyapeeth, Pune Bundle No. A-3:- Page No 35 to 48 - Car expenses bills of Bharati Vidyapeeth, Pune Bundle No. A-4:- Pages 11 to12 & 14 to 18 - Counter foils of cash deposits in Bharati Sah. Bank Ltd. total of Rs. 21.20 lakhs. Bundle No.A-4:-Page No. 20 to 25 - Details of labour payment made to M/s Valmiki Enterprises of Rs. 1,06,400/- by Bharati Vidyapeeth. Bundle No. A-4:- Page No 26 - Details of payment of Rs. 10,000/- to Shri Amrale Rohidas Dyanoba as a advance for office work by Bharati Vidyapeeth. Bundle No A-8 :- Page No. 6 to 27 - Details of payments made to Shri D.G. Kanase of Rs. 22,000/-. Bundle No. A-8:- Page No 28 to 30 - Details of payments made to Shri Rajiv Sathe of Rs. 1,25,000/-. Bundle No. A-8:- Page No. 31 to 32 - Details of expenditure incurred by B.V Medical College (B.V.M.C), Sangali,. Total Rs. 6,34,479/- Page No. 33 to 37 - List of teaching staff of B.V.M.C. Sangali. Bundle No. A-9:- Page No. 45 - Counter foil of cash deposit in Bharati Sahakari Ban....
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....eipts on account of dev fund and trust fund credited in the books are not genuine. Since the receipt credited in the books of a/c not from the genuine source for the charitable purpose of the trust, apparently the income of assessee trusts is not liable for exemption u/s 11, 12, 13 of the IT Act 1961. Therefore notices u/s 153C is hereby issued for the following A. Yrs: A.Y 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 Date: 30.3.2007" Assessing Officer 18. Thus, there are 23 different documents seized by the revenue and are found relevant to the assessee. AO relied on the said documents for getting satisfied for invoking the provisions of section 153C of the Act in respect of all the six AYs. We have examined the contents of pages 5 and 6 of the paper book filed before us as these tables explained the contents of the said 23 items of the documents vis a vis the relevant AYs. For the sake of completeness of this order, we proceed to scan the pages of the paper books and import the same as under. 19. During the proceedings before, Ld Counsel mentioned that the above tables reflect the ....
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....e cross appeals. Based on the existence of the seized documents, these six AYs can categorized into two categories. (i) the AYs without seizure of any documents or any other seizures as referred to in the provisions of section 153C of the Act; and (ii) the AY with the seizure of some documents as referred to in the provisions of section 153C of the Act. 22. AYs 2000-01 to 2004-05: In connection with the AYs at sl no (i) above ie AYs 2000-01 to 2004-05, admittedly, there is no seizure of the documents as evident from the satisfaction note and the tables explained by the assessee. Considering the above scope of the provisions and legal propositions already adopted by this bench in the case of Sinhgad Technical Education Society (supra), we are of the opinion that the issuance of notices u/s 153C for the AYs 2000-01 to 2004-05, where there are no seized documents, is invalid. 23. AY 2005-06: In connection with the AYs at sl no (ii) above ie AYs 2005- 06, admittedly, there is some seizure of the documents as evident from the satisfaction note and the tables explained by the assessee. Out of the 23 different items of documents seized as evident from the scanned tables imported in ....
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....ed one with no financial implications. Thus, the documents, the ledger in the instant case relevant for the AY 2005-06, with no financial implications can neither be considered incriminating nor be considered capable of springing satisfaction to any AO that there is scope of undisclosed income in respect of the third party assessable u/s 153C of the Act. Accordingly, the legal grounds raised in all these appeals of the assessee relating to the validity of the notice u/s 153C of the Act are allowed in favour of the assessee in respect of all the AYs under consideration. Further, we are of the considered opinion that the adjudication of the other grounds relating to the other legal and merit oriented issues is merely an academic exercise. Therefore, the relevant grounds in all the four appeals are dismissed as academic. 24. In the result the appeals of the assessee are allowed. Six Revenue's Appeals 25. Further, regarding the appeals by the revenue, we find they have to be dismissed as we have held that the AO invalidly assumed jurisdiction u/s 153C of the Act and consequently relief granted to the assessee on the issue of the validity of the issuance of notices u/s 153C of the....
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.... A-2 18 This is an advance voucher for expenses of the trust out of office funds with Shri R D Shinde, an accountant of Bharati Vidyapeeth 10,000.00 9 A-2 17 This is a voucher for an advance given to Shri V G Dubal for expenses of the trust out of office funds with Shri RD Shinde, an accountant of Bharati Vidyapeeth 15,000.00 22.06.2005 2006-07 10 A-2 16 11 A-2 1 to 4 122 12 This is a voucher for an advance given to Shri Harale for expenses of the trust out of office funds with Shri V G Dubal, an employee of Bharati Vidyapeeth These papers are belonging to Mr. H B Lad, a person from Kundal who came to visit to the trustee of Bharati Vidyapeeth. The vehicle brought by him was given for reparing by him and for reference, he has given the name of the trust. These papers are not actually related to the trust. 5,500.00 11,160.00 26.05.2005 2006-07 A-3 35 to 48 This is a voucher and supporting documents for diesel and maintenance expenses of car of Bharati Vidyapeeth. This amount is paid out of office funds with Shri VG Dubal. This expenditure is duly accounted for in the ....