TaxTMI 
TaxTMI 
TaxTMI 
2021 (10) TMI 740
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....t 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 learned CIT DR on behalf of Revenue, we therefore for....
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.... 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. However, for the sake of brevity and completeness, M/s Dorset India Pvt. Ltd (DIPL) may be taken as lead ma....
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....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, 17 to 22, 23 to 27, 47 to 87 (kindly see page 369 of PB - I) , Annexure A - 3 page nos. 1 to 10 (page no. 369 of PB - I), no reference of the said documents has been made in the assessment order nor any addition on the basi....
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....15 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 assessee - appellant and various companies/entities of Dorset Group: a) That Kaba Holding AG (a Non resident company based in Switzerland) was an existing shareholder of Dorset Kaba Security Systems Pvt Ltd ( DKSSPL). b) That shareholding of Kaba Holding AG in Dorset Kaba Security S....
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....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 Agreement dated 01.04.2014. Further, M/s Mars Industries Pvt. Ltd. was amalgamated into Dorset India Pvt. Ltd. as per the order of Hon'ble Delhi High Court dated 05.05.2015 with effect from 01.04.2014. 2.7 That in view of the aforesaid background and facts, it is most humbly submitted that all the Business Transfer Agreement dated 01/04/2014 and Business Transfer agreements dated 11/06/2014 and also the order....
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....ring 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). Dorset India Pvt. Ltd also e filed form no 3CEA (audit report relating to capital gain on slump sale) before Income Tax department and the said form no 3CEA is with reference to slump sale on the basis of Business transfer agreements dated 11/06/2014 (kindly see 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 Indi....
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....ges 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 dated 20/09/2014 is enclosed and forms part of paper book at page no 49 to 53 of PB - I) is part of books of accounts and is not the incriminating material. From the perusal of the said deed dated 20/09/2014 it may be observed that during the year the there was change in partnership structure. The appellant Modtech Industries was the partnership firm constituting Shri Ashok Bansal, Shri Rajesh Kumar Bansal and Shri Ashok Minda. As per the Retirement cum constitution deed there was change in constitution of the firm and Shri A....
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....s 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 that the material under consideration is not "incriminating". It is not in doubt that the AO has stated that the documents under consideration (which pertained to, and also, information contained therein related to the appellant) had a bearing on the total income of the appellant". It is here submitted that the said finding so recorded by learned CIT (A), is against the proposition of law so laid down by Hon'ble Apex Court and Hon'ble High Court of Delhi, as was also cited before learned CIT (A). As it has been held in the case laws as is also cited below, that "t....
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....gh 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 emerges is as under: iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment o....
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....on 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 respect to the seized documents. 2.12 From the perusal of the above, it may be observed that during the course of search no incriminating material has been found during the course of search. In the satisfaction note also it has nowhere been alleged that the documents mentioned above are incriminating material and as such, reopening of assessment in this case is without jurisdiction and passing of order u/s 153C of the Income Tax Act is also bad in law. 2.13 That the aforesaid arguments are equally applicable to the case of M/s Modtech Industries, as similar satisfaction note has been recorded by learned AO (kindly see pages 91 to 93 of PB - I) and the documents so mentioned therein, have been duly ....
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....A 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 Delhi in the case of CIT vs RRJ Securities Ltd. reported in 380 ITR 612 8. He further, submitted that that the said aforesaid legal argument was 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), which even finds mention at pages 8 and 32 of learned CIT (A) order. However, the learned CIT (A) vide order dated 21.08.2019 dismissed the said ground so raised by the assessee company at pages 89 to 93 of CIT (A) order, wherein, while dismissing the said appeal, the learned CIT (A) has rec....
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....n 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 judgment of Hon'ble High Court of Delhi in the case of SSP Aviation vs DCIT reported in 346 ITR 177, rather supports the case of the assessee and further, the same case has been duly considered by Hon'ble jurisdictional high court in subsequent judgments i.e. CIT vs RRJ Securities Ltd reported in 380 ITR 612, as well as by Hon'ble Apex Court in the case of CIT vs Singhad Educational Society reported on 397 ITR 344 and further, the learned CIT DR has not been able to place reliance on any document/ material on record which can be termed as "incriminating" in nature, forming part of satisfaction note. Further, it was argued by learned counsel of the assessee that the learned CIT DR cannot improve the orders so passed by learned AO and CIT (A), as they themselves, in the impugned orders so passed have not disputed th....
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....s 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 India Pvt. Ltd!. Particulars of documents pertaining to Mis Dorset India Pvl Ltd. & Mis Mars Industries Pvt Ltd as per Annexure A-1 Page Numbers Brie/particulars of the document 7 to 32 Copy of lease deed dated 01.08.2014 between Mis Mars Industries Pvt, ltd.(Lessor) and Mis Dors'et Kaba Security Systems Pvt.Ltd. with respect to the property situated at Village Bhora Ka/on, Tehsi/-pataudi, Gurgaon, Haryana. 33 to 44 Copy of valuation report dated 05.03.201] in respect of Property Khasra No.756 situated at Bino/a Industrial Area, Tehsil-Farikh Nagar, Gurgaon, Haryana belonging to Ms Mars Industries Pvt.Ltd. 45 to 74 Copy of sale deed dated 26.09.2004 in respect of Property situated at Village Bhora Kalan, Tehsil- Farukh Nagar, Gurgaon, Haryana, executed by Milt International Land Development Pvt.Ltd. in favour of Mis Mars Indu....
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....lars 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 Kaba Security Systems Pvt Ltd. 95-155 Copy of Business Transfer Agreement (BTA) dated 1L06.2014 between M/s Mars Industries Pvt. Ltd. & M/s Dorset Kaba Security Systems Pvt. Ltd. Particulars of documents pertaining to M/s Dorset India Pvt. Ltd. & M/s Mars Industries Pvt. Ltd. as per Annexure- A-2 Page Numbers Brief particulars of the document 7-9 Copy of cost Sharing Agreement dated 10.05.2007 between M/s Dorset Kaba Security Systems Pvt. Ltd. and M/s Mars Industries Pvt. Ltd. 17-22 Copy of Trade Mark & License Agreement dated 10.05.2007 between Mis Mars Industries Pvt.Ltd. & Mis Dorset Kaba Security Systems Pvt.Ltd. . 23-27. Copy of Component Supply Agreement dated 10.05.2007 between Mis Mars Industries Pvt.Ltd. (Supplier) & Mis Dorset Kaba Security Systems Pvt.Ltd. (Buyer) 47-87. Copy of Share Subscription & Shareholders Agreement dated 15.12.2006 between Mis K.aba Holding AG and Mis Delhi....
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....ame 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 reopened u/s.153C. This principle has been settled by the Hon'ble Supreme Court in the case of Singhad Technical Education Society (397 ITR 344) and various judgments of jurisdictional high court along with order of this Tribunal. At this juncture, we would like to refer to decisions of the aforesaid proposition as under: i) CIT vs Singhad Educational Society (SC) reported in 397 ITR 344. 18. The ITAT permitted this additional ground by giving a reason that it was a jurisdictional issue taken up on the basis of facts already on the record and, therefore, could be raised. In this behalf, it was noted by the ITAT that as per the provisions of Section 153C of the Act, incriminating material which was seized had to pertain to the Assessment Years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four Assessment Years. Since this requirement under Section 153C of the Act is essential for as....
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.... 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 commencing an enquiry under section 153C, it would be impermissible for him to commence such enquiry if it is apparent that the documents/assets in question have no bearing on the income of the assessee for the relevant assessment years." iii) PCIT vs Param Dairy Ltd. (Delhi HC) in ITA No. 37/2021. 5. We have considered the aforesaid contentions and are of the view that no substantial question of law arises, as the matter is squarely covered by Kabul Chawla supra, which has been correctly applied to the facts of the case by the ITAT. The ITAT, in the impugned order has held that in the audited report filed by the assessee along with the report, cash book, ledger, bank book etc. were mentioned; that the respondent assessee was maintaining books on TALLY Accounting Software which was seized during the search and was being treated as incriminating material; however, regular books of account of the assessee, by no stretch of imagination, could be treated as incriminating material to form basis of framing assess....
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....ning 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 assessment is pending. The seized documents must at least clearly point out that there is some undisclosed income, which here in this case, as is discussed below, are not in the nature of incriminating material so as to warrant any addition. 15. In view of our above discussion, the documents so seized and referred in the satisfaction note are being discussed and analyzed as under: a) Annexure A - 1 Page nos. 7 to 32, 33 to 34 and 45 to 74, Annexure A - 2 page no. 1 to 5, Annexure A - 2 page nos. 7 to 9, 17 to 22, 23 to 27, 47 to 87, Annexure A - 3 page nos. 1 to 10. Our Analysis: We find that no reference of the said documents has been made in the assessment order nor any addition on the basis of these documents in the assessment order passed under section 153C of the Act. Thus, with reference to the aforesaid documents, since no additions have been made by learned AO, we find that the same are not incriminating in nature. * Page no. 7 to 35 of Annexure A - 2, found from OBC Bank Locker of Sh. Rajesh Kumar Bansal and Smt. Rekha Bansal being co....
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....ginal 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, as such, the same cannot be termed as "incriminating material". c) Page no 95 to 155 of Annexure A-1 (locker at ICICI Bank) Copy of Business Transfer Agreement (BTA) dated 11.06.2014 between M/s Mars Industries Pvt. Ltd. and M/s Dorset Kaba Security Pvt. Ltd (at pages 530 to 651 of PB - II). Page nos. 53 and 54 of Annexure A-2 (locker at OBC) being copy of MOU made on 01.09.2014 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 (at pages 26 to 27 of this synopsis). Page no 51 to 94 of Annexure A-1 (locker at ICICI Bank) Copy of Business Transfer Agreement (BTA) dated 11.06.2014 between M/s Dorset India Pvt. Ltd. and M/s Dorset Kaba Security Pvt. Ltd (at pages 443 to 529 of PB - II). Page no 91 to 101 of Annexure A-3 (locker at ICICI) Copies of disclosure letters dated 11.06.2....
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.... nature, as the said agreements are duly disclosed and its financial implication duly reflected in the return of income filed prior to recording of satisfaction note and also even prior to the date of search. 16. In so far as the submissions made by ld. CIT-DR, regarding seized documents having bearing on total income becoming incriminating documents automatically, we are not impressed with the arguments of Ld CIT DR, as the same goes contrary to the judgments of jurisdictional high court and Hon'ble Apex Court. And further, with reference to the order of assessment or even going by the order of learned CIT (A), the learned CIT DR was not able to point out any single document which was not disclosed by assessee prior to recording of satisfaction note and neither the judgments so relied by counsel of assessee were rebutted or contradicted by learned CIT DR. That further, we also find that the reliance placed on the judgment of SSP Aviation vs DCIT reported in 346 ITR 177 is also misplaced on facts, as after considering the said judgment Hon'ble High Court of Delhi in a subsequent judgment in the case of CIT vs RRJ Securities Ltd reported in 380 ITR 612 has held as under: "34. In ....
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....e, where seized assets or documents are handed over to the AO. The question whether the documents/assets seized could possibly reflect any undisclosed income has to be considered by the AO 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 AO to be satisfied that the assets/documents seized during search of another person reflect undisclosed income of an Assessee before commencing an enquiry under Section 153C of the Act, it would be impermissible for him to commence such enquiry if it is apparent that the documents/assets in question have no bearing on the income of the Assessee for the relevant assessment years. 37. As expressly indicated under Section 153C of the Act the assessment or reassessment of income of a person other than a searched person would proceed in accordance with the provisions of Section 153A of the Act. The concluded assessments cannot be interfered with under Section 153A of the Act unless the i....
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.... rebutted by learned CIT DR by bringing any material to the contrary on record. 19. In view of our observations and findings given hereinabove, we have no hesitation to hold that firstly, none of the documents mentioned in the satisfaction note are incriminating in nature out of which any inference can be drawn as to any undisclosed income, relating to assessee-company for the Assessment Year 2015-16 and; since, the impugned assessment year was not pending, as the assessment stood completed prior to the date of initiation of proceedings u/s 153C of the Act, therefore, we hold that without any incriminating material, concluded assessments cannot be tinkered with and no addition can be made without there being any incriminating material for the impugned assessment year. 20. Accordingly, we hold that the additions made by the Assessing Officer are beyond the scope of Section 153C r.w.s. 153A. 21. In the result, since the assessment order is set aside on legal issue, therefore, there is no need to decide the additions on merits which are left with academic discussion only. Accordingly, appeal of the assessee is allowed of the Assessee in ITA No. 8046/Del/2019 is allowed. 22. That f....