TaxTMI 
TaxTMI 
2018 (10) TMI 578
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.... 1. That as per the proviso to section 153C, six years have to be reckoned from date of recording of satisfaction note i.e. March 10, 2014 which falls in the financial year 2013-14 i.e. assessment year 2014-15 accordingly preceding six years i.e. assessment years 2008-09 to 2013-14 can only be assessed under section 153C and present assessment framed under section 153C for the assessment year 2007- 08 is time barred, illegal, void ab initio and requires to be declared as nullity. 2. That as per the documents described in beginning of the order (paragraph 2) which are purportedly seized from search operation on another person, the same as replied to the Assessing Officer during assessment are duly disclosed and do not give rise to any undisclosed income duly objected before the Assessing Officer (reply dated December 11, 2014 disposed on December 16, 2014), and sans any undisclosed income emanating out of the seized documents which is further fortified from the final order where none of the additions has any semblance with the seized documents, accordingly, notice issued under section 153C, order passed under section 153C and the learned Commissioner of Income-tax (Appea....
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....es to be quashed. 2. That purported satisfaction note recorded on March 25, 2014 is not valid in the eyes of law as the same does not meet the mandatory criteria stipulated under section 153C of the Act. 3. That notice issued under section 153C, order passed under section 153C and subsequent order passed by the learned Commissioner of Income-tax (Appeals) are all bad in law for want of juris diction and requires to be quashed. On the merits 4. That without appreciating categorical reply of the assessee where it is plainly denied that the assessee is not in effective receipt of any amount from Fiitjee group which stand was taken before the learned Commissioner of Income-tax (Appeals) also as noted in the impugned order, the confirmation of the addition of Rs. 23,59,65,731 is arbitrary and invalid being bereft of legally sustainable grounds. 5. That without appreciating mandatory jurisdictional requirement of the presence of incriminating material, addition is made by the learned Assessing Officer in the assessment order which is mechanically confirmed by the Commissioner of Income-tax (Appeals) with out adverting to inundated bin....
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....e of more than seven months, the assessee filed a return of income for both the assessment years involved. Along with the returns, the assessee also filed revised balance-sheet and revised income and expenditure account. Notices under section 143(2) of the Act were issued in both the assessment years on December 12, 2014. The objections raised by the assessee against proceeding under section 153C of the Act were disposed of by the Assessing Officer and communicated to the assessee in writing vide letter dated December 16, 2014. All the documents seized from the premises of the . . . group had also been already provided to the assessee. The assessee did not comply with the queries of the Assessing Officer and repeatedly raised objections against the proceedings under section 153C of the Act and sought adjournment on one or other pretext. 3.1 The Assessing Officer brought to the knowledge of the assessee that the statement of Sri Aseem Gupta, controller of the assessee-society, wherein he admitted that a bank account was opened and operated in Canara bank in the name of the assessee by the directors of . . . . . . . . group. Sh. Aseem Gupta further admitted that the assessee-trust....
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....Assessing Officer disallowed the amount of donation paid of Rs. 23,59,65,731 and assessed the total income at Rs. 23,59,56,850 vide order dated March 23, 2015. 3.6 Aggrieved, the assessee filed any appeal before the learned Commissioner of Income-tax (Appeals) in both these assessment years and challenged the assessment both on the legality in assuming jurisdiction as well as on the merits. In both the assessment years, the learned Commissioner of Income-tax (Appeals) rejected the appeal of the assessee, holding that the assessee had been unable to justify any of the grounds of the appeal. The relevant finding of the learned Commissioner of Income-tax (Appeals) in the assessment year 2007-08 is reproduced as under : "8.5 Reply dated February 27, 2017 was submitted by the appellant which is reproduced above in paragraph 7.2. It is seen that the appel lant has adopted evasive tactics and has not given the complete information/details etc. Thereafter, several opportunities were given to the appellant but it could not justify the grounds of appeal raised by it. A perusal of the entire facts of the case, particularly with reference to the appeal of the appellant for the asse....
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....longed to the appellant, but it was claimed by the appellant that the bank account was operated by persons of the FIITJEE group. The appellant was required to specify the exact persons involved and to explain as to how the FIITJEE group was carrying out the transactions from the bank account of the appellant. The appellant was also required to support the claims with full details and evidences. However, the appellant kept on stating that the FIITJEE group was having full control over the transactions through the bank account of the appellant but did not submit complete evidence against the FIITJEE group. 8.15 It is observed that when confronted with the mismatch and discrepancies, it was claimed by the appellant that they cannot explain any discrepancy or difference, "as transactions were routed by officials of the FIITJEE group. You are requested to ask the reason of the same from the FIITJEE group." The appellant further stated in the written submissions dated March 6, 2017 that : 'In support of our claim, that bank account was operated by the FIITJEE group. We want to submit that, cheques for routing the trans action were filled and deposited by them and we....
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....six years have to be reckoned from the date of recording of satisfaction note, i.e., March 10, 2014, which falls in the assessment year, 2014-15, and thus accordingly preceding assessment years i.e. the assessment year 2008-09 to the assessment year 2013-14, can only be assessed under section 153C of the Act and the present assessment year i.e. 2007-08 cannot be assessed under section 153C of the Act and, thus, making assessment under section 153C of the Act by the Assessing Officer, is void ab initio and requires to be declared as nullity. 4.1 The learned counsel filed a paper book containing pages 1 to 170 and in support of the ground raised, he referred to the judgment dated August 17, 2017 of the hon'ble Delhi High Court in the case of Principal CIT v. Sarwar Agency Pvt. Ltd. (I. T. A. No. 422 of 2017)- [2017] 397 ITR 400 (Delhi), available on pages 62 to 66 of the paper book. 4.2 The learned counsel submitted that section 153C(1) of the Act has been amended by way of the Finance Act, 2017 with effect from April 1, 2017, for specifying that the assessment years preceding the assessment year relevant to the previous year in which search is conducted, are to....
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....received by the Assessing Officer of the other person, for which no evidences could be available in search, will get included. According to her, this interpretation would defeat the purpose for which section 153A/153C have been introduced. 4.3.2 In view of the submission, she stated that notice under section 153C of the Act has been issued validly. 4.4 We have heard the rival submissions and perused the relevant material on record. The issue in dispute in the instant case is that which six assessment years are to be assessed under section 153C of the Act. 4.4.1 As far as section 153A of the Act is concerned, the six assessment years, which have to be assessed or reassessed, are the six assessment years, preceding the assessment year relevant to the previous year in which search is conducted or requisition is made, as specified in clause (b) of sub- section (1) of section 153A of the Act, which is reproduced as under : "153A. Assessment in case of search or requisition.-(1) Notwith standing anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated unde....
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.... other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person (for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and) for the relevant assessment year or years referred to in sub-section (1) of section 153A : Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by ....
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....ears preceding the year of search. The said amendment is prospective." 4.4.5 In respect of the period prior to the above amendment, the hon'ble Delhi High Court RRJ Securities Ltd. (supra), after noticing the decision in SSP Aviation Ltd. v. Deputy CIT [2012] 346 ITR 177 (Delhi), has held as under (page 628 of 380 ITR) : "21. As discussed hereinbefore, once the Assessing Officer of the searched person is satisfied that the seized assets/documents belong to another person and the said assets/documents have been transferred to the Assessing Officer of such other person, the proceedings for assessment/reassessment of income of the other person has to proceed in accordance with provisions of section 153A of the Act. Section 153A requires that where a search has been initiated under section 132 of the Act, the Assessing Officer is required to issue notice requiring the noticee to furnish returns of income in respect of six assessment years relevant to the six previous years preceding the previous year in which the search is conducted. As discussed here inbefore, by virtue of second proviso to section 153A, the assessment/ reassessment pending on the date of initiat....
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....the Assessing Officer of the assessee. 4.4.7 In the instant case, the satisfaction under section 153C of the Act has been recorded by the Assessing Officer of the searched person on March 25, 2014. A copy of the relevant satisfaction note has been placed by the assessee on pages 15 and 16 of the paper book. The Assessing Officer of the assessee has received the documents subsequent to recording of dissatisfaction and thus, even we can take this date of recording satisfac tion under section 153C of the Act as the date when the Assessing Officer of the assessee received the documents from the Assessing Officer of the search person. Since this date i.e. March 25, 2014 falls in the assessment year 2014-15, the six assessment years preceding the assessment year 2014-15, are the assessment year 2008-09 to the assessment year 2013-14. Since the assessment year involved before us is 2007-08, it is beyond the six assessment years which could be assessed/reassessed under section 153C of the Act. Thus, in our opinion the assessment proceeding under section 153C of the Act in assessment year in question, is without jurisdiction and beyond the purview of the said provision. Accordingly....
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....i High Court dated April 18, 2018 in the case of Principal CIT v. N. S. Software (Firm) in I. T. A. No. 791 of 2017- [2018] 403 ITR 259 (Delhi). 8.1.1 The learned counsel, further argued that for a moment, even if it is presumed that the documents belong to the assessee but the same are not in the nature of incriminating documents and are documents main tained in regular course of the business transactions. The learned counsel submitted that all the documents mentioned in the satisfaction note have been replied to be adequately recorded/explained/accounting books of account and no undisclosed income is emanating out of the same and no addition has been made on the basis of the said documents in the assessment order. The learned counsel referred to the documents found and their explanation reproduced by the learned Commissioner of Income-tax (Appeals) in the impugned order. In support of the contention that for a valid jurisdiction under section 153C of the Act the document or material belonged to the other person should be incriminating and must relate to the assessment years, whose assessment are sought to be reopened, the learned counsel relied on the decision dated Sept....
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.... has been made on the basis of the seized document is misleading and not correct. In support of her contention she relied on the following judicial pronouncements : 1. The decision of the hon'ble Delhi High Court in the case of Principal CIT v. Super Malls Private Limited (I. T. A. No. 449 of 2016)- [2017] 393 ITR 557 (Delhi) 2. The decision of the hon'ble Gujarat High Court in the case of Kamleshbhai Dharamshibhai Patel v. CIT [2013] 31 tax mann.com 50 (Guj). 3. The decision of the hon'ble Delhi High Court in the case of SSP Aviation Ltd. v. Deputy CIT [2012] 346 ITR 177 (Delhi) ; [2012] 20 taxmann.com 214 (Delhi). 8.2.2 She distinguished the decision of the Delhi High Court in the case of N. S. Software (Firm) (supra) stating that in the said case satisfaction was recorded in very casual manner without giving detail of contents of the seized document, whereas in the present case, documents have been properly specified as belonging to the assessee. She submitted that the documents in question are incriminating qua the assessment year under consideration and therefore the requirement provided in the case of Sinhgad Technical Education....
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....hat 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 in so far 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 docu ments 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 estab lished 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 ....
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....r refers related to the assessee. 4. Copy of rule and regulation of the assessee society These are public documents and can be available with any person of public at large. 5. Copy of memorandum of Association of the assessee society These are public documents and can be available with any person of public at large. 6. Copy of resolution to the effect that account shall be opened with Canara bank Hauz Khas These are public documents and can be available with any person of public at large. 7. Copy of certificate of registration with register of societies These are public documents and can be available with any person of public at large. 9. Copy of account opening form submitted to Canara bank, Hauz Khas Documents belongs to the Canara bank, Hauz Khaus and only related to/ refers to the assessee 10. Copy of draft MoUs of the assessee with FIITJEE LTD. Unsigned draft letter , not belonging to the assessee. 11. Copies of draft letters addressed to FIITJEE Ltd regarding the scheme of scholarship to be given to them. Unsigned draft letter , not belonging to the assessee 8.3.5 From the copy of letter of re....
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....e the name of my entities M/s. EMV and M/s. Sadbhawana Trust for rotating their certain funds. I agreed to their offer as they promised me to give statutory audit of some of their concern. Later on, Sh. Rajesh Sharma send me account opening form of Canara Bank, Hauz Khas, New Delhi to my office for signature. After my signature the opened bank account of M/s. CMV and M/s. Sadbhawana in the said bank. He send me the blank cheque books for my signature which was signed by me. How the cheques were used or what amount was mentioned on them, I was never informed. M/s. Fiitzee Ltd. was having complete control over these accounts thereafter Sh. Rajesh Sharma prepared the profit and loss account and balance-sheet in his office for the financial year 2010-11 for M/s. CMV and M/s. Sadbhawna and send the same to me along with bank statements in August, 2011. Thereafter, I prepared books of account and got accounts of these trust and society audited from my friend Sh. Ravi Gupta, Chartered Accountant. Till the date of receipt of profit and loss account and balance-sheet, I was not aware about the nature of the transaction made in the bank account of these trust/ society. As incentive, I was al....
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..../s. Fiitjee Ltd. from the said trust/society. Ans : I have not made any such agreement for receiving back donation from M/s. Fiitjee Ltd. on behalf of these trust/society. For any reason either violation of any contents of agreement or else nor I am likely to made such agreement in future." 8.3.6 We note that the statement of Shri Aseem Gupta, has not been retracted and as far as the facts of the case available on record, the assessee has not challenged truth of the statements of Sh. Aseem Gupta. 8.3.7 It is evident from the above statement, how the copies of bank account opening form and other documents of the assessee-society travelled to the premises of the FIITJEE Ltd. and thus there is no doubt as these documents belong to the assessee. The assessee contended that these documents belongs to the Canara Bank, however, the assessee has not discharged his onus to prove the said contention. These documents are also not with the Canara Bank . Accordingly, we reject the contention of the assessee raised in this regard and hold that the documents mentioned in the satisfaction note under section 153C of the Act recorded by the Assessing Officer of the searche....
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....oned therein belong to the other person. 8.5.1 We have heard the arguments of the learned counsel on this issue. According to the learned counsel, in the satisfaction note under section 153C of the Act, the Assessing Officer of the searched person should record how the documents not belong to the searched person and the same belong to the other person. The learned counsel in support of the above proposition has relied on the decision of the hon'ble Delhi High Court in the case of N. S. Software (Firm) (supra). In the case of N. S. Soft ware (Firm) (supra) the satisfaction note recorded has been reproduced by the High Court in paragraph 20 of the decision, which is extracted as under: "23-7-2010 A search and operation was conducted on Raj Darbar Group of cases on July 31, 2008. During the court of search and operation at the premises of : (i) Party A-20, Residence-cum-office of Narendera Kumar Aggar wal, 1st & 2nd Floor, 7, Western Avenue, Maharani Bagh, New Delhi. Various papers were found and seized belonging to M/s. N. S. Software Pvt. Ltd. the annexure are marked as under : Party A-20 Annexure A-26, Hard Disk con....
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....e No. 27 contains copy of PAN No AAAAC1679A of CMV educational society Page Nos. 36-39 contains Moa of CMV educational society Page No. 40 contains certify true extracts from the board meet ing of CMV educational society held on June 23, 2010. Page Nos. 41 to 44 papers related to CMV educational society Page No. 45 contain ledger account of CMV educational society in the books of FIITJEE 1-9-2010 to 2-10-2010. 2 Annexure A-20, party F02 pages 42 to 48 contain draft MOU between society and FIITJEE Limited. In view of the above, I am satisfied that documents seized belongs to a person other than the person searched under section 132 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), 1961. Hence, the proceeding under section 153C of the Income-tax Act, 1961 is initiated in the case of M/s. CMV Education Society." 8.5.6 It is evident that in the above satisfaction note relevant to the instant case the Assessing Officer of the searched person has recorded detail of each document and what the said document contains. The nature of the document is also clear in the satisfaction note recorded. Whereas i....
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....ons. The asses see is required to satisfy that about the genuineness of the activities promised or claimed to be carried out in each financial year to claim the exemption. Nowhere in its replies has the assessee-society shown evidence that the said company carried out any charitable activities during the year under consideration. Hence the assessee-society is held to have contravened the provisions relating to application of income by charitable societies and therefore the benefit of sections 11 and 12 is denied to the assessee. The amount paid to FIITJEE Ltd. is treated as its income being not utilised for the charitable purposes. Accordingly, the society is assessed as an association of persons and taxed as provided under provisions of section 167B of the Income-tax Act, 1961. 6. As per income and expenditure statement filed along with orig inal return of income, contribution received have been shown at Rs. 23,59,65,731. Donations paid have been shown at Rs. 23,59,65,731. No other expenses have been debited on account of charitable activities ?" 9.4 Before us, the learned counsel has failed to explain as how the funds have been utilised for charitable purpose. I....