TaxTMI 
TaxTMI 
2021 (10) TMI 740
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....n 132(1) of the Income Tax Act was carried out in Dorset group and Rajesh Bansal group of cases on 06/12/2016. The ABOVE assessee's were not subjected to search, however, notice u/s 153A dated 13.12.2017 of the Income Tax Act was issued to the assessee's, which were subsequently dropped; and then notice under section 153C of the Act dated 25.09.2018 was issued after recording a satisfaction note in the case of assessee's. 3. That during the course of hearing both Assessee and Revenue agreed on the fact that all the three captioned appeals involve consideration of common issues and it was further, agreed by both the parties that M/s Dorset India Pvt. Ltd (DIPL) may be taken as lead matter, since learned CIT (A) has sustained the additions in the hands of DIPL on substantive basis, against which assessee is in appeal and has deleted the addition so made by learned AO in the hands of M/s Modtech Industries, against which both Revenue and Assessee are in appeal. 4. We have also gone through the materials available on record and find that the issues involved in all the appeals are common and identical and in view of the aforesaid submissions of the Counsel of the assessee and lear....
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....and conjecture and shows complete lack of application of mind. 6. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other." 6. During the course of hearing Ld. Counsel for the Appellant, Sh. Salil Aggarwal, Senior Advocate, though took up all the grounds of appeal raised in memo of appeal, however he heavily stressed upon the issue raised in Ground No. 2 as incorporated above by the assessee - appellant, which is purely a legal ground and goes to the root of the validity of assessment and addition made in the impugned assessment order. Therefore, the same is being taken up first. In support of the aforesaid ground and in addition to the oral arguments, the learned counsel for the assessee - appellant furnished brief written synopsis, which is being extracted here below for the sake of brevity and completeness of records: "Facts in brief and legal synopsis with regards to ground no. 2 to 4 taken before Hon'ble Tribunal 1. At the outset, it is most humbly submitted that the captioned appeals involve considerations of common issues....
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....2(1) of the Income Tax Act was carried out in Dorset group and Rajesh Bansal group of cases on 06/12/2016. It is most humbly submitted that the assessee company was not subjected to search and thus, no panchanama was drawn in the name of the appellant. However, notice u/s 153A dated 13.12.2017 of the Income Tax Act was issued to the assessee, which was subsequently dropped and then notice under section 153C of the Act dated 25.09.2018 was issued after recording a satisfaction note in the case of assessee - appellant (kindly see pages 365 and 368 of PB - I). 2.3 At this juncture, it is most humbly submitted that the satisfaction note was recorded on 24.09.2018 by the learned AO in order to initiate the proceedings under section 153C of the Act against the assessee - appellant (copy of satisfaction note is at pages 367 to 370 of PB - I). 2.4 The documents found during the course of search which forms part of satisfaction note is being summarized and discussed as under :- a) Annexure A - 1 Page nos. 7 to 32, 33 to 34 and 45 to 74 (kindly see page 367 of PB - I), Annexure A - 2 page no. 1 to 5 (kindly see page 368 of PB - I), Annexure A - 2 page nos. 7 to 9, ....
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....ties (kindly see pages 54 to 66, 67 to 71 and 72 to 80 of PB - I). 2.5 From the perusal of the above it may be observed that i) Business Transfer agreement dated 01/04/2014, ii) Business Transfer agreement dated 11/06/2014 and iii) High Court order dated 05.05.2015 regarding amalgamation were found during the course of search and forms part satisfaction note. It is further submitted that the documents mentioned in the satisfaction note being i) page no 52 regarding copy of MOU made on 01.09.2014 and ii) Page no 91 to 101 being copies of disclosure letters dated 11.06.2014, merely records the details of transactions as per the BTA dated 11.06.2014. Thus, BTA dated 11.06.2014 and 01.04.2013 are basic documents, which have duly been disclosed in the returns of income prior to recording of satisfaction note. 2.6 That before adverting to the arguments with regards to documents being disclosed/ reflected in the books of accounts and duly disclosed prior to recording of satisfaction note or even on the date of search, the assessee - appellant would seek to submit the chronological sequence of events, which led to the entering of the said agreements between the a....
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....Systems Pvt Ltd was to acquire all the businesses from Dorset group for sum of Rs. 198 crore and the bifurcation of the amounts between Modtech Industries, Mars Industries, and Dorset India Pvt Ltd was only the appropriation. As it will be absurd to say that value of assets of Rs. 15.31 crore have been taken over for Rs. 34 crore ( Mars Industries Pvt Ltd), and the value of assets of Rs. 5 crore have been taken over for Rs. 156 crore ( Modtech Industries). l) As such, the value prescribed of Rs. 198 crore was the value of total business acquired and that is why, the real intent of entering into separate BTA's with Modtech Industries, Mars India Pvt. Ltd., and Dorset India Pvt Ltd dated 11/06/2014 was to bind all the parties and to perform act's in accordance with the agreements, as entering into agreement only with Dorset India Pvt Ltd may not have been binding on Modtech Industries and Mars Industries. m) In view of the above, amount received from Dorset Kaba Security Systems Pvt Ltd was offered to tax in the hands of Dorset India Pvt Ltd., as hardware business of Modtech Industries was actually acquired by Mars Industries Pvt. Ltd. as per the Business Transfer A....
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....d M/s Dorset Kaba Security Systems Pvt. Ltd. and also between M/s Dorset India Pvt. Ltd. and M/s Dorset Kaba Security Systems Pvt. Ltd. The business transfer agreements dated 11/06/2014 entered between all the aforesaid 4 entities is part of books of accounts of M/d DIPL and is not incriminating material and the said fact have also been admitted by the learned Assessing officer in the point no 6 of show cause notice dated 16/11/2018 issued during the course of assessment proceeding (kindly see pages 109 to 112 of PB - I, relevant pages 110 to 111). From the perusal of the above it may be observed that on the basis of business transfer agreement dated 11/06/2014 the original return of income have been filed by Dorset India Pvt. Ltd., as M/s Modtech Industries was taken over by M/s Mars India Pvt. Ltd. and further, M/s Mars India Pvt. Ltd. was amalgamated in M/s Dorset India Pvt. Ltd. and as such, the due disclosures were made by M/s Dorset India Pvt. Ltd. The capital gains on slump sale on the basis of said agreements have been shown in the original return of income so filed by M/s Dorset India Pvt. Ltd. (kindly see pages 247, 248 to 249, 278, 280, 326 of PB - I). ....
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....ed with Dorset India (P) Limited filed before the Hon'ble High Court on 19- 11-2014 i.e. the petition for amalgamation of Mars Industries (P) Limited with Dorset India (P) Limited was filed much prior to the date of search and that is how, the same was also seized during the course of search (said document is at page 116 to 145 of PB - I). The said fact of amalgamation and its effect in books of accounts, along with the return of income was duly disclosed prior to search proceedings (kindly see pages 246 305, 315, 318 and 324 of PB - I). In view of the above, it is most humbly submitted that the amalgamation order by Hon'ble High Court forms part of books of accounts of M/s DIPL and the original return of income have been filed by the appellant, duly disclosing the effect of the said agreement prior to the recording of satisfaction note or even the date of search and as such, the same cannot be termed as "incriminating material". iv) Retirement cum constitution deed dated 28.09.2014 with regards to M/s Modtech Industries (actual date is 20/09/2014 as per the document found during search) The retirement cum constitution deed dated 20/09/2014 (deed....
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....the sales consideration". Thus, it is submitted that even the learned AO admitted the fact that the said documents so forming part of satisfaction note have been disclosed and return of income incorporating the effect of the same had been filed prior to the date of recording of satisfaction note. 2.10 Further, it is submitted that the said arguments were specifically taken before learned CIT (A) wherein, judgments of Hon'ble Delhi High Court in the case of Pr. CIT Central-2 Vs. Index Securities Pvt. Ltd. 86 Taxmann.com 84 (Delhi), CIT Vs. RRJ Securities Ltd. reported in 380 ITR 612, and by the Supreme Court in the case of CIT Vs. Sinhgad Technical Education Society reported in 397 ITR 344, were cited before learned CIT (A) (kindly see page 8 to 9 of CIT (A)'s order). However, the learned CIT (A) vide order dated 21.08.2019 dismissed the said ground so raised by the assessee company (kindly see pages 89 to 93 of CIT (A) order). However, while dismissing the said appeal, the learned CIT (A) has recorded a finding that "Therefore, if such document have been used to make entry in books of accounts and the ROI is filed before the date of search, it does not necessarily mean tha....
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....that emerges therefrom is discussed in para 10. It was specifically recorded that the counsel for the Department could not point out to the contrary. It is for this reason the High Court has also given its imprimatur to the aforesaid approach of the Tribunal. That apart, learned senior counsel appearing for the respondent, argued that notice in respect of Assessment Years 2000-01 and 2001-02 was even time barred. 19. We, thus, find that the ITAT rightly permitted this additional ground to be raised and correctly dealt with the same ground on merits as well. Order of the High Court affirming this view of the Tribunal is, therefore, without any blemish. Before us, it was argued by the respondent that notice in respect of the Assessment Years 2000-01 and 2001-02 was time barred. However, in view of our aforementioned findings, it is not necessary to enter into this controversy." b) Judgment of the High Court of Delhi in the case of CIT vs. Kabul Chawla reported in 380 ITR 573. "37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerg....
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....t of Delhi in the case of PCIT Meeta Gutgutia reported in 395 ITR 526. f) Order of ITAT Delhi in the case of ACIT vs Moon Beverages Ltd. in ITA No. 115 to 118/Del/2018. g) Order of ITAT Delhi in the case of DCIT vs Sundaram IT Parks Pvt. Ltd. in ITA No. 5166/Del/2018. h) Order of ITAT Delhi in the case of ACIT vs M/s Five Vision Planners Pvt. Ltd. in ITA No. 4460/Del/2014. i) Judgment of High Court of Delhi in the case of PCIT vs M/s Dreamcity Buildwell Pvt. Ltd. in ITA No. 1152/2017. j) Order of ITAT Delhi M/s TDI Infrastructure Ltd. vs DCIT in ITA No. 5580, 4409, 4410 and 5072/Del/2012. k) Order of ITAT Delhi ACIT vs Realtech Construction Pvt. Ltd. (ITAT Delhi) in ITA No. 6569/Del/2016. 2.11 It is further submitted that the findings so recorded by learned CIT (A) rather supports the case of assessee company, as it is an admitted fact now, that the documents so seized and recorded in satisfaction note were duly recorded in books of accounts on the basis of which return of income was filed by the assessee and thus, cannot be termed as "incriminating", as no undisclosed income was unearthed or could be inferred with resp....
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.... ITR 344. ii) Judgment of Hon'ble High Court of Delhi in the case of PCIT vs Param Dairy Ltd. in ITA No. 37/2021. iii) Judgment of the High Court of Delhi in the case of CIT vs. Kabul Chawla reported in 380 ITR 573. iv) Judgment of High Court of Delhi in the case of PCIT vs Jaypee Financial Services Ltd. reported in 280 Taxman 147. v) Judgment of the High Court of Delhi in the case of PCIT Meeta Gutgutia reported in 395 ITR 526. vi) Order of ITAT Delhi in the case of ACIT vs Moon Beverages Ltd. in ITA No. 115 to 118/Del/2018. vii) Order of ITAT Delhi in the case of DCIT vs Sundaram IT Parks Pvt. Ltd. in ITA No. 5166/Del/2018. viii) Order of ITAT Delhi in the case of ACIT vs M/s Five Vision Planners Pvt. Ltd. in ITA No. 4460/Del/2014. ix) Judgment of High Court of Delhi in the case of PCIT vs M/s Dreamcity Buildwell Pvt. Ltd. in ITA No. 1152/2017. x) Order of ITAT Delhi M/s TDI Infrastructure Ltd. vs DCIT in ITA No. 5580, 4409, 4410 and 5072/Del/2012. xi) Order of ITAT Delhi ACIT vs Realtech Construction Pvt. Ltd. (ITAT Delhi) in ITA No. 6569/Del/2016. xii) Judgment of High Court of De....
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....as further submitted by the learned counsel that the AO while issuing the show cause notice dated 16.11.2018 issued during the course of proceedings and after recording complete facts, recorded that "However, on perusal of tax computation it is seen that capital gains has been worked out be deducting the net worth of the business undertaking (which includes huge value of Goodwill) from the sales consideration". Thus, even the learned AO admitted the fact that the said documents so forming part of satisfaction note have been disclosed and return of income incorporating the effect of the same had been filed prior to the date of recording of satisfaction note. 9. That Ld. CIT DR Sh. J.K. Mishra, placed heavy reliance on the order of AO and CIT (A) and argued that the documents so recorded in the satisfaction note had a bearing on total income of the assessee and thus, the same can be termed as incriminating. The learned CIT DR further, placed reliance on the judgment of Hon'ble High Court of Delhi in the case of SSP Aviation vs DCIT reported in 346 ITR 177. 10. That the learned counsel of the assessee in rejoinder submitted that the reliance placed by learned CIT DR on the judgm....
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....o, as also, information contained therein relating to Mis Dorset India Pvt. Ltd. and Mis Mars Industries Pvt. Ltd. (already amalgamated with Mis Dorset India Pvt. Ltd.). I have already recorded my satisfaction w.r.t. documents seized in the case of Sh. Rajesh Kumar Bansal and Smt. Rekha Bansal, during search and seizure u/s 132 of the LT. Act, 1961, conducted on 13.01.2017, of their Locker No. 1537, Oriental Bank of Commerce, Hauz Khas, Delhi, and the said documents pertaining to, as also, information contained therein relating to M/s Dorset Industries Pvt. Ltd. and M/s Mars Industries Pvt. Ltd. (already amalgamated with M/s Dorset Indian Pvt. Ltd.) Relevant part of the said satisfaction note is reproduced below:- " ...Perusal of the documents seized from the Locker no 1537, Oriental Bank ofCqmmefce, Hauz Khas, Delhi, shows that out of the seized documents, documents from pages- 7 to 32,33 Io 44, 45 to74 o(Annexure A-I and pages I to 5, 7 to35, 39 to51, 53 & 54 o(Annexure A- 2 of the said seized Annexures- pertain to, as also, information contained therein relate to M/s Dorset India Pvt. Ltd. and Mis Mars Industries Pvt. Ltd. {a/reqdy amalgamated with M/s Dorset I....
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....ducted on 13.01.2017, of his Locker No. 1945R 1810247 with the ICICI Bank, Defence Colony, Delhi, and the said documents pertaining to, as also, information contained therein relating to M/s Dorset India Pvt. Ltd. and M/s Mars Industries Pvt. Ltd. (already amalgamated with M/s Dorset India Pvt. Ltd.). Relevant part of the said satisfaction note is reproduced below- "...Perusal of the documents seized from the Locker No. 1945R 1810247 with the ICICI Bank, Defence Colony, Delhi shows th_at out of the seized documents, dOc ments from pages-51 to 94, 95 to 1_55 of Annexure A-1, pages 7 to 9, 17 to 22, 23 to 27, 47 to 87 of Annexure A-2 and pages 1 to 10, 91 to 101 of Annexure A-3, of the said seized Annexures pertain to, as also, infonnation contained therein relate to Mis Dorset India pvt, Ltd. and M/s Mars Industries Pvt. Ltd. ( already amalgamated with Mis Dorset India Pvt. Ltd). Particulars of documents pertaining to Mis Dorset India Pvt. td. & M/s Mars Industries Pvt. Ltd. as per Annexure A-1 Page Numbers Brief particulars of the document 51-94 Copy of Business Transfer Agreement (BTA) dated 11.06.2014 between M/s Dorset India Pvt. Ltd. & M/s Dorset K....
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....section I53A. I am satisfied that notices u/s l 53C are required to be issued for the assessment years A.Ys 2011-12, 2012- 13, 2013-14, 2014-15, 2015-16 and 2016-17 in the case of M/s Dorset India Pvt. Ltd. Accordingly, Notice u/s 153C of the LT. Act, 1961 is being issued in the case of of M/s Dorset India Pvt. Ltd. for the assessment years 2011-12, 2012- 13, 2013-14, 2014-15, 2015-16 and 2016-17 for determination of total income of M/s Dorset India Pvt. Ltd. including that of M/s Mars Industries Pvt. Ltd. (already amalgamated with M/s Dorset India Pvt. Ltd.) for the said assessment years." 13. It is an admitted fact that the aforesaid documents so referred in the satisfaction note are the only documents which form the basis and edifice for acquiring jurisdiction under section 153C of the Act and there are no other documents which were found and seized. Before adverting to the documents so referred in the satisfaction note and our analysis with regards to the same thereafter, it would be worthwhile to note that it is now a well settled proposition of law that seized documents must be incriminating and must relate to assessment year whose assessment are sought to be reop....
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....he Assessing Officer of the assessee, are duly disclosed and reflected in the returns filed by the assessee, no further interference would be called for. Similarly, if the books of account/documents seized do not reflect any undisclosed income, the assessments already made cannot be interfered with. Merely because valuable articles and/or documents belonging to the assessee have been seized and handed over to the Assessing Officer of the assessee would not necessarily require the Assessing Officer to reopen the concluded assessments and reassess the income of the assessee. The question whether the documents/assets seized could possibly reflect any undisclosed income has to be considered by the Assessing Officer after examining the seized assets/documents handed over to him. It is only in cases where the seized documents/assets could possibly reflect any undisclosed income of the assessee for the relevant assessment years, that further enquiry would be warranted in respect of those years. Whilst, it is not necessary for the Assessing Officer to be satisfied that the assets/documents seized during search of another person reflect undisclosed income of an assessee before comm....
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.... in the case of RRJ Securities Pvt. Ltd. (supra) and Index Securities Pvt. Ltd. (supra) are that, if the documents belonging to the assessee are found from the possession of a person search u/s.132, that does not ipso facto mean that, concluded assessment of the assessee are necessarily to be reopened u/s.153C. If the documents seized have no relevance or bearing on any income of the assessee for the relevant Assessment Year which could not possibly reflect any undisclosed income, then provision of Section 153C cannot be resorted too. Here, in this case, the seized documents as noted above and also noted by the Ld. CIT(A) is not incriminating at all and has no corelation with any undisclosed income of the assessee and accordingly based on such documents the jurisdiction u/s.153C could not have been initiated. 14. Thus, in view of our aforesaid discussion and also in view of aforesaid judgments, we hold that the concluded assessments cannot be interfered unless there is incriminating material discovered from the seized documents belonging or pertaining to the assessee, and further, no additions can be made where the assessments are framed u/s.153C for unabated year i.e. where no ....
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....recording of satisfaction note or even the date of search and as such, the same cannot be treated as "incriminating material". b) Page no 39-51 of Annexure A-2 (locker at OBC) being copy of Business Transfer Agreement (BTA) dated 01.04.2014 between M/s Modtech Industries and M/s Mars Industries Pvt. Ltd. (kindly see pages 431 to 442 of PB - II). Our Analysis: The said document so seized by Revenue, is a business transfer agreement dated 01/04/2014 and is at page nos. 431 to 442 of PB - II. We have also noticed that, M/s Modtech Industries has filed its return of income on 20.02.2016 duly incorporating the effect of the said document at pages 1 to 2 and 25 of PB - I. Further, we have also noticed that M/s Modtech Industries has also e filed form no 3CEA (i.e. audit report relating to capital gain on slump sale) disclosing the fact of said transfer of business at page 5 of PB - I). In view of the above, we have no hesitation in holding that the business transfer agreement dated 01/04/2014 forms part of books of accounts of M/s Modtech Industries and on the basis of BTA dated 01/04/2014 the original return of income have been filed by the appellant, duly dis....
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....11/06/2014 (at pages 253 and 255 of PB - I). The said fact of amalgamation and business transfer was also disclosed in the balance sheet by M/s DIPL including Goodwill arising as a result of Merger of M/s Mars India Pvt. Ltd. (at pages 305, 315, 318 and 324 of PB - I). Similarly, we have noticed that Page nos. 53 and 54 of Annexure A-2 (locker at ICICI) being copy of MOU made on 01.09.2014 and disclosure letters in reference to the purchase price consideration of the BTA executed between M/s Dorset Kaba Security Systems Pvt. Ltd. and M/s Mars Industries Pvt. Ltd., and between M/s Dorset Kaba Security Systems Pvt. Ltd. and M/s Dorset India Pvt. Ltd. in pursuance to BTA dated 11.06.2014, is nothing but recording the mutual consent of both the parties to BTA's to give effect to the said agreement and these documents are in relation to BTA's, the effect of which has been, as noticed above, had been duly taken in the books of accounts and original return of income filed by assessee company. Thus, here again, we have no hesitation in holding that the four business transfer agreements dated 11/06/2014 forming part of satisfaction note are not incriminating in nature, as the said agr....
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....icate any undisclosed income of the Assessee under his jurisdiction. As explained in SSP Aviation Ltd. (supra), Section 153C only enables the AO of a person other than the one searched, to investigate into the documents seized and/or the assets seized and ascertain that the same do not reflect any undisclosed income of the Assessee (i.e a person other than the one searched) for the relevant assessment years. If the seized money, bullion, jewellery or other valuable article or thing seized as handed over to the AO of the Assessee, are duly disclosed and reflected in the returns filed by the Assessee, no further interference would be called for. Similarly, if the books of accounts/documents seized do not reflect any undisclosed income, the assessments already made cannot be interfered with. Merely because valuable articles and/or documents belonging to the Assessee have been seized and handed over to the AO of the Assessee would not necessarily require the AO to reopen the concluded assessments and reassess the income of the Assessee. 36. The decision in SSP Aviation Ltd. (supra) cannot be understood to mean that the AO has the jurisdiction to make a reassement in every case....
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....the time of initiation of proceedings u/s 153C, is not a judicial exercise where the defense of the other party (the appellant) is called for and considered. Naturally, it is bound to have inherent subjectivity. Therefore, if such documents have been used to make entry in books of accounts and the ROI is filed before the date of search, it does not necessarily mean that the material under consideration is not "incriminating". 18. That we also find that even during the assessment proceedings, the learned AO issued show cause notice dated 16.11.2018, wherein, after discussing the documents seized and reply filed by the assessee, he recorded that "However, on perusal of tax computation it is seen that capital gains has been worked out by deducting the net worth of business undertaking (which includes huge value of Goodwill) from the sales consideration". Thus, we find that even the learned AO has not been able to point out as to which of the documents seized and referred in the satisfaction note is "incriminating", as there should be some unearthing of undisclosed income from the documents seized, which is absent in the impugned matter. The said findings so recorded by learned AO a....