TaxTMI 
TaxTMI 
2017 (9) TMI 585
X X X X Extracts X X X X
X X X X Extracts X X X X
....f law. Consequently, these appeals are being disposed of by this common order. 3. ITA Nos. 566/2017, 570/2017 and 571/2017, in which the Respondent Assessee is Index Securities Private Limited ('ISRPL'), are directed against the order dated 26th August 2016 passed by the ITAT in ITA Nos. 430 to 432/Del/2014 for the Assessment Years ('AY') 2007-08, 2008-09 and 2010-11. 4. ITA Nos. 567/2017, 568/2017 and 569/2017, in which the Respondent Assessee is Vidhya Shankar Investment Private Limited ('VSIPL'), are directed against the common order dated 28th September 2016 passed by the ITAT in ITA Nos. 6569 to 6571/Del/2013 for the AYs 2007-08, 2008-09 and 2009-10 respectively. 5. In both these sets of appeals, the common question of law sought to be urged by the Revenue is whether the ITAT erred in confirming the order of the Commissioner of Income Tax (Appeals) ['CIT (A)'] which held that no proceeding under Section 153C could have been initiated against the Assessees for the AYs in question since no incriminating documents belonging to the Assessee and relating to the AYs in question were found during search. Cases relating to ISRPL 6. As far as the Assessee, ISRPL, is conc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as AY 201011 was concerned, the AO made an addition of Rs. 50 crores representing share application money received from one investor. Contentions of ISRPL before the CIT (A) 10. The Assessee then went in appeal before the CIT (A). By an order dated 28th October 2013 the CIT (A), by separate orders, allowed the appeals in respect of each of the AYs. One of the grounds urged before the CIT (A) was that there was no valid assumption of jurisdiction under Section 153C of the Act since the Revenue had failed to establish that the documents seized belonged to the Assessee. Further, since the assessment for the relevant AY already stood completed before the search took place, it was urged that the AO had erred in invoking jurisdiction under Section 153C without there being any incriminating document relevant to each of the AYs the assessments for which were sought to be reopened. Even otherwise, the documents seized, i.e. the trial balance and balance sheet, could not be termed as incriminating documents and these were already duly disclosed and accepted by the AO in the subsequent assessment years. 11. On merits, it was pointed out that the Assessee had, for each of the AYs in q....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he two share holders in his assessment order dated 28.03.2013. Without bringing any material on record in support of his observation or enquiry, the Assessing Officer made an addition of the entire share capital and share premium received by the Appellant company during the year under consideration." (g) The CIT (A) held that the existence and identity of the shareholders cannot be doubted and stood explained on the basis of documents submitted by the Assessee. (h) As regards the sixteen shareholders, the CIT (A) held that the Assessee had discharged its burden regarding identity, creditworthiness and genuineness of the investments made and had provided all the evidence. This was not refuted by the AO. The CIT (A) observed that the AO "failed to unearth any wrong or illegal dealings by the appellant and therefore, it would be miscarriage of justice if he harboured any suspicion to treat the subscribed share capital and share premium as undisclosed income of the appellant company." (i) A reference was made to the materials (Annexures A-19 to A-24) seized from the residential premises of Surender Kumar Jain and Virender Kumar Jain purportedly representing date wise cash book....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2010-11. In fact, for AY 2010-11, on the basis of the said documents, no addition was made. Although the CIT (A) also decided the case on merits, in view of the fact that the ITAT agreed with the CIT (A) that the assumption of jurisdiction under Section 153 C of the Act was erroneous, the ITAT did not examine the other grounds raised by the Revenue. Cases relating to Vidhya Shankar Investment Pvt. Ltd. 15. In the case of VSIPL, the satisfaction note drawn up by its AO reads thus: "During the course of assessment proceedings in the case of M/s. Jagat Agro Commodities Pvt. Ltd. it was noticed that during the search and seizure operation under Section 132 undertaken on 14th September 2010 in the case of M/s. Jagat Agro Commodities Pvt. Ltd. at 802, Amba Deep Building, K.G. Marg, New Delhi a number of documents were found and seized from the above premises. Page No. 94 and 95 of Annexure A-17 were seized by Party J-5. The seized documents contain balance sheet and trial balance of M/s. Vidhya Shankar Investments Pvt. Ltd for the period 1st April 2010 to 4th September 2010. 2. The case of M/s. Vidhya Shankar Investments Pvt. Ltd has been centralized to this Circle vide Lette....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in response to the notice under Section 131 of the Act. The CIT (A) held that the AO failed to bring on record any material to disprove the documents produced by the Assessee. On the other hand, the Assessee had been able to prove the identity, creditworthiness and genuineness of the investors. 21. In the further appeal by the Revenue against the order of the CIT (A), the ITAT concurred with the CIT (A) for the same reasons as in the appeals concerning ISRPL, that the assumption of jurisdiction by the AO under Section 153 C of the Act was bad in law. Submissions of learned counsel for the Revenue 22. Mr. Ashok K. Manchanda, learned Senior standing counsel for the Revenue first submitted that notwithstanding that the search took place prior to 1st June 2015 (i.e. prior to the date of the amendment to Section 153 C) it was sufficient for the Revenue to show that the documents seized 'pertained' to the Assessee. There was no need for the Revenue to show that the seized document, in fact, belonged to the Assessee. He sought to rely on decisions in Principal Commissioner of Income Tax v. Super Malls (P) Limited [2017] 393 ITR 557 (Del), Commissioner of Income Tax (Centr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to each such AY. He submitted that the observations in the said decision to that effect were not obiter dicta but actually arose for consideration. Nevertheless even the obiter dicta of the Supreme Court was binding on the High Court. He submitted that even on merits the CIT (A) had returned a finding of fact on the basis of the documents produced by the Assessees, that the additions made by the AO were not sustainable in law. Analysis and reasons 27. The recent decision of the Supreme Court in Commissioner of Income Tax-III, Pune v. Sinhgad Technical Education Society (supra) is a complete answer to both points urged by the Revenue. The said decision, therefore, requires to be discussed in some detail. 28.1 The Supreme Court noted that the Assessee had raised a challenge to the validity of the assumption of jurisdiction by the AO under Section 153C of the Act for the first time before the ITAT. It was urged on behalf of the Revenue that the ITAT erred in allowing the said challenge by the Assessee by way of additional grounds. A reference was made by the Revenue to the decision of this Court in SSP Aviation Limited v. Deputy Commissioner of Income Tax [2012] 346 ITR 177 (....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... was time barred. However, in view of our aforementioned findings, it is not necessary to enter into this controversy." 28.3 From a reading of the above two paragraphs, it is plain that the Supreme Court (i) agreed with the ITAT that the documents seized had to relate to the AYs whose assessments were reopened and that this was an essential jurisdictional fact and (ii) upheld the decision of the ITAT to permit the additional ground to be raised before it for the first time. 28.4 The Supreme Court also agreed with the decision of the Gujarat High Court in Kamleshbhai Dharamshibhai Patel (supra) to the extent it held that "it is an essential condition precedent that any money, bullion or jewellery or other valuable articles or thing or books of accounts or documents seized or requisitioned should belong to a person other than the person referred to in Section 153A of the Act." The Supreme Court observed: "This proposition of law laid down by the High Court is correct, which is stated by the Bombay High Court in the impugned judgment as well." 28.5 The above categorical pronouncement of the Supreme Court cannot, by any stretch of imagination, be termed as obiter as has bee....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... also hold that in order to justify the assumption of jurisdiction under Section 153 C of the Act the documents seized must be incriminating and must relate to each of the AYs whose assessments are sought to be reopened. Since the satisfaction note forms the basis for initiating the proceedings under Section 153 C of the Act, it is futile for Mr. Manchanda to contend that this requirement need not be met for initiation of the proceedings but only during the subsequent assessment. 32. In the present case, the two seized documents referred to in the Satisfaction Note in the case of each Assessee are the trial balance and balance sheet for a period of five months in 2010. In the first place, they do not relate to the AYs for which the assessments were reopened in the case of both assessees. Secondly, they cannot be said to be incriminating. Even for the AY to which they related, i.e. AY 2011-12, the AO finalised the assessment at the returned income qua each Assessee without making any additions on the basis of those documents. Consequently even the second essential requirement for assumption of jurisdiction under Section 153 C of the Act was not met in the case of the two Assessee....