TaxTMI 
TaxTMI 
2021 (11) TMI 1007
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....of the case and in law, the Ld. CIT(A) erred in deleting the addition made on account of deemed dividend under section 2(22)(e) of the I.T. Act. 2. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in accepting fresh evidence and not giving opportunity to the Assessing Officer as per sub-rule (3) to Rule 46A of IT Rules, 1962 . 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the amount of Rs. 81,51,723/- advanced by Models Construction Pvt. Ltd. to the firm M/s Models Real Estate Developers cannot be treated as dividend under section 2(22)(e) of the Income Tax Act in the hands of the assessee in spite of the fact that the assessee was having share holding exceeding 10% of the voting power in the said company and also have substantial interest in the said Firm? 4. For the above grounds and any additional grounds that may be agitated during the course of the hearing it is prayed that the order of the Ld. CIT(A)-2, Panaji may be quashed and that of the AO restored. 3. The assessee had filed five cross objections arising out of the appeals filed by the revenue. ....
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.... the consequent order of assessment passed by the learned assessing officer is bad in law as the assessments u/s 153 A could not have been made legally in the hands of the person searched, namely M/s. Model Constructions Pvt. Ltd, and consequently no legal and valid satisfaction could be drawn u/s 153 C in the case of the Respondent /Cross Objector. 6. Without Prejudice the Respondent / Cross Objector denies himself liable to be assessed over and above the total income reported by the Respondent / Cross Objector of Rs. 12,25,777/- under the facts and circumstances of the case. 7. Without prejudice to the right to seek waiver as per the parity of reasoning of the decision of the Hon'ble Apex Court in the case of Karanvir Singh 349 ITR 692, the Respondent / Cross Objector denies itself liable to be charged to interest under section 234 A, 234 B & 234 C of the Income Tax Act under the facts and circumstances of the case. Further the levy of interest under section 234 A, 234 B & 234 C of the Act is also bad in law as the period, rate, quantum and method of calculation adopted on which interest is levied are all not discernable and are wrong on the facts of the cas....
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....fonso appealed to the CIT(A). By order dated 28.07.2015, the CIT(A) allowed the appeals and held that the amounts reflected in the books of the said firm could not ne treated as 'deemed dividend' u/s.2(22)(e) of the Act. Accordingly, the assessment orders dated 31.03.2014 made by the AO were set aside. 8. Aggrieved thereby, the revenue preferred appeal before the Tribunal. During the pendency of the appeals, the assesses requested the ACIT to furnish them a copy of satisfaction for issuance of notice u/s.153C of the Act. Such copies were furnished to the assesses on 22.08.2016 or thereabouts. However, the documents which were relied upon by the ACIT were not furnished to the assessee. Therefore, the assesses by letters dated 25.08.2016 sought the same. There was no responses to these letters dated 25.08.2016. The assessee also filed cross objections before the Tribunal. The Tribunal by a consolidated order dated 02.12.2016 allowed the appeals filed by the revenue but dismissed the cross objections of the assessed by refusing to condone the delay of 248 days in filing of the same. 9. Feeling aggrieved, the assessee preferred appeals before the Hon'ble jurisdictional High Court....
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....assessees as well as the Revenue. 10. Now, the above appeals have been listed for hearing before us for deciding the issues as per the direction of the Hon'ble jurisdictional High Court, mentioned in paragraph 52 supra of the High Court's order and the jurisdictional grounds reproduced hereinabove. 11. Ld. DR for the revenue had filed consolidated paper book in respect of the assessee on 01.09.2021 and at page 4 of the paper book the order sheet was placed which is as under :- F.No. DCIT/C-l(l)/PNJ/2021-22 Date : 01.09.2021 To, The Commissioner of Income Tax(DR) ITAT Panaji, Goa Sir, Sub: Submission of records in 153C cases-for producing before the ITAT Pune-reg. Ref.: 1. The CIT(DR) Panaji letter in F.No. Info/CIT(DR)/ITAT/PNJ/2021-22, dt. 11.08.2021. 2. This office letter no. Misc./DCIT-l(l)/PNJ/2021-22 dtd. 17-08-2021 ******* Kindly refer t....
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....s Construction Pvt. Ltd. On 31.01.2012, documents belonging to Shri Edgar Afonso were seized vide A/EBA/10, so also amounting to Rs. 3,00,000/- was seized from the residential premises of the assessee at Tivai Waddo, Calangute. In view of the above, I am satisfied that the case is covered by the provision of section 153C. Hence issue notice u/s.153C. Issue notice u/s.153C for the A.Y.2006-07 to 2011-12. Sd/- Deputy Commissioner of Income-tax, Central Circle, Panaji-Goa 13. It is the contention of the ld. DR that the order sheet is the satisfaction note prepared by the AO in the case of the assessee before us for the purposes of initiating the proceedings u/s.153C of the Act. Beside that, the ld. DR had also filed letter dated 06.10.2021 along with the ordersheet (satisfaction note) recorded in the file of M/s Models Construction Pvt. Ltd.. The letter along with ordersheet are reproduced as under :- 14. On the basis of the abovesaid document, it was contended by the ld. DR that the satisfaction was not only recorded in the file of the searched person but also in the file of the other person, namely, assessee before us. It was submitted that the revenue at the time of ....
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....earlier paper book dated 24/09/2021 and would like to submit as below: 1. The asssesse had raised the jurisdictional ground no. 2 & 3 in the grounds of cross objections filed with the Hon. ITAT, the copy of the grounds of appeal is enclosed. Annex-1, which is reiterated in para 5 page 4 of the order of the Hon. High Court of Bombay at Goa, in assessee case. 2. As per para 52 at page 23/24 of the order, the Hon. High Court has remanded back the matter "with a direction to permit the assesses to raise the issue of compliance or non-compliance with jurisdictional parameters necessary to initiate action under Section 153C of the IT Act.", accordingly the assessee raise the compliance / non-compliance of the following judicial parameters to be complied by the ld AO. 1) Whether the AO of the searched person has recorded his satisfaction as required u/s 153C of the Income Tax Act'1961, in compliance with the Circular No. 24/2015 dated 31/12/2015 issued by Central Board of Direct Taxes. 2) Whether the satisfaction recorded describes the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned b....
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....ined and accepted by the department during the proceedings. • We rely upon the Madeeha Enterprises v/s ACIT, Central Circle - 2, IT(SS)A No. 91 To 96/PAN/2O16 IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI, where it was held that the order sheet is not of satisfaction in so far as there is no identification as what is the nature of the documents seized or what is the undisclosed assets or income which is found as belonging to the assessee, as such the notices issued on the assessee u/s 153C and consequently assessment completed u/s 143(3) r.w s 153C stands annulled. 3) "Whether the money, bullion, jewellery or other valuable article or thing or books of account or documents seized are incriminating in nature." • The cash found of Rs. 3.00 lacs, during the search proceedings was as per the books of accounts of the assesee and has been duly explained during the search proceedings. We enclose the copy of the recorded statement u/s 131 of the assesee, whereby the cash found was reconciled and explained at Q3 of the statement, which has been duly accepted by the department. As such none of the documents including Rs. 3.00 lacs cash seizure a....
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....e that preceded the note issued under it vitiates the assessment. We find the Hon'ble Delhi High Court in the case of Pepsico (supra) has held that before the provisions of section 153C of the Act can be invoked, the AO of the searched person must be satisfied that the seized material does not belong to the searched person. The Hon'ble Delhi High Court in the case of Canyon Financial Services Ltd. vs. ITO, [399 ITR 202] = [TS-5743-HC-2017(Delhi)-O], has held that in absence of conclusion either in satisfaction note that the seized documents mentioned there in belonged not to the searched person, but, to the assessee makes the 153C proceedings invalid. We find, the Hon'ble Delhi High Court in the case of ARN Infrastructure India Ltd.(supra) has held that the amendment to Section 153C of the Act is prospective with effect from 1st June, 2015. In the case of Renu Constructions Pvt. Ltd. (supra), the Hon'ble Delhi High Court has held that "pertained to" added with effect from 01.06.2015 is prospective in nature. Since, in the instant case, no satisfaction has been recorded in the file of the searched person that the seized documents belonged to the other party and do not belon....
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....strued as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person. [Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made except in cases where any assessment or reassessment has abated.] [(2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year- (a) no return of income has been furnish....
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....ossession of any valuable assets which has not been or would not be disclosed under the Act. In such a case, a search can take place. Following the search, if any the books of account, other documents, any valuable assets is or are found in the possession or control of any person in the course of search, then the books of account or other documents or valuable assets could be seized. Under section 153A, the satisfaction regarding an inference of liability must be recorded. The Assessing Officer has to issue notice to the assessee i.e. the person searched......................................................... In such a case, the Assessing Officer has to issue notice to assessee or reassess income of the other person under section 153A of the Act. Thus, the fact that search has been conducted would not justify issuance of notice under section 153A. It is only during a valid search when certain incriminating materials are detected, notice could be issued. 50. Chapter XIV-B which deals with special procedure for assessment of search cases deals with undisclosed income as a result of search, the computation thereof and such other provisions... ... ... ... ... ... .......
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....n be issued. The notices issued under section 153A/ 153C of the Act cannot be issued without recording the satisfaction as regard to the inference of liability based on the seized incriminating documents. It is settled position of law that unless the incriminating material leading to an inference of undisclosed income is found, invocation of section 153A/ 153C is not possible. Reference may be made to the decision of the Delhi High Court in the case CIT vs. Kabul Chawla, reported in 380 ITR 573 wherein it was held that: "Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." 26. We may also refer the decision of the Hon'ble Apex Court in the case of CIT vs. Singhad Technical Education in Civil Appeal No. 11080 of 2017 dated 29.08.2017 wherein it was held that: 18) The ITAT permitted this additional ground by giving a reason that it w....
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....zed were incriminating in nature and the assessee has not disclosed the income in the previous years on account of searched documents and thereafter the Assessing Officer shall issue the notice u/s.153C of the Act. 28. For the above said purpose, we may fruitfully rely upon the decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax v. Calcutta Knitwears (2014) 6 SCC 444, wherein the Hon'ble Supreme Court has laid down the law in the following manner :- 18. In order to resolve the controversy, certain provisions of the Act require to be noticed by us. 19. Chapter XIV-B of the Act is a special provision carved out by the legislature for the purpose of the assessments in cases pertaining to Sections 132 and 132A of the Act. The said chapter was introduced by the Finance Act, 1995 with effect from 01.07.1995 and comprises Sections 158B to 158BH of the Act. The provisions under this Chapter were made inapplicable in case of search initiated under Section 132 or Section 132A after 31.05.2003 by introduction of an amendment to the Chapter as Section 158BI vide the Finance Act, 2003 with effect from 01.06.2003. The lis before us requires examin....
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....osed income for the block period: Provided that no notice under section 148 is required to be issued for the purpose of proceeding under this Chapter: Provided further that a person who has furnished a return under this clause shall not be entitled to file a revised return;] (b) The Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of section 143 [section 144 and section 145]shall, so far as may be, apply; (c) The Assessing Officer, on determination of the undisclosed income of the block period in accordance with this Chapter, shall pass an order of assessment and determine the tax payable by him on the basis of such assessment; (d) The assets seized under section 132 or requisitioned under section 132A shall be dealt with in accordance with the provisions of section 132B.] *** *** *** Section 158BD. UNDISCLOSED INCOME OF ANY OTHER PERSON. Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made unde....
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.... merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used." 25. In Commissioner of Stamp Duties (NSW) v. Simpson, (1917) 24 CLR 209 Barton J., citing Viscount Haldane in Lumsden v Inland Revenue Commissioners, [1914] AC 877, stated the following: "The duty of Judges in construing Statutes is to adhere to the literal construction unless the context renders it plain that such a construction cannot be put on the words. This rule is especially important in cases of Statutes which impose taxation." The Court in Simpson case (supra) sought to determine whether a deed poll constituted a settlement for the purposes of Section 49 of the Stamp Duties Act, 1898 (NSW). Section 3 which defined the word 'settlement' as meaning 'any contract or agreement' was examined. The Court by adopting a strict literal approach held that only a contract or an agreement could constitute a settlement and that Section 49 providing for deed poll was not applicable and therefore, the taxpayer did not have to pay any sta....
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....t held that under a literal interpretation Section 36A could apply to allow the taxpayer to claim a loss. Barwick CJ, speaking for the majority relied on the decision in Inland Revenue Commissioners v. Westminster (Duke), [1936] AC 1 which advocated the literal approach be applied when interpreting taxation legislation and stated the following: "It is for the Parliament to specify, and to do so, in my opinion, as far as language will permit, with unambiguous clarity, the circumstances which will attract an obligation on the part of the citizen to pay tax. The function of the court is to interpret and apply the language in which the Parliament has specified those circumstances. The court is to do so by determining the meaning of the words employed by the Parliament according to the intention of the Parliament which is discoverable from the language used by the Parliament. It is not for the court to mould or to attempt to mould the language of the statute so as to produce some result which it might be thought the Parliament may have intended to achieve, though not expressed in the actual language employed" 29. In Cooper Brookes (Wollongong) Pty Ltd v. Federal Commis....
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.... "32. The literal rule of interpretation really means that there should be no interpretation. In other words, we should read the statute as it is, without distorting or twisting its language. 33. We may mention here that the literal rule of interpretation is not only followed by Judges and lawyers, but it is also followed by the lay man in his ordinary life. To give an illustration, if a person says "this is a pencil", then he means that it is a pencil; and it is not that when he says that the object is a pencil, he means that it is a horse, donkey or an elephant. In other words, the literal rule of interpretation simply means that we mean what we say and we say what we mean. If we do not follow the literal rule of interpretation, social life will become impossible, and we will not understand each other. If we say that a certain object is a book, then we mean it is a book. If we say it is a book, but we mean it is a horse, table or an elephant, then we will not be able to communicate with each other. Life will become impossible. Hence, the meaning of the literal rule of interpretation is simply that we mean what we say and we say what we mean." 34. Thus, t....
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....4) 4 SCC 276 would be apposite: "13. It is well-known that when a statute levies a tax it does so by inserting a charging section by which a liability is created or fixed and then proceeds to provide the machinery to make the liability effective. It, therefore, provides the machinery for the assessment of the liability already fixed by the charging section, and then provides the mode for the recovery and collection of tax, including penal provisions meant to deal with defaulters. ... Ordinarily the charging section which fixes the liability is strictly construed but that rule of strict construction is not extended to the machinery provisions which are construed like any other statute. The machinery provisions must, no doubt, be so construed as would effectuate the object and purpose of the statute and not defeat the same. (Whitney v. Commissioners of Inland Revenue 1926 A C 37, CIT v. Mahaliram Ramjidas (1940) 8 ITR 442 , Indian United Mills Ltd. v. Commissioner of Excess Profits Tax, Bombay, [1955] 27 ITR 20(SC) and Gursahai Saigal v. CIT, Punjab, [1963] 1 ITR 48(SC)." 37. It is the duty of the court while interpreting the machinery provisions of a taxing statute....
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.... of the Act or a requisition of books were made under Section 132A of the Act and thereafter, transmit the records for assessment of such other person. Therefore, the short question that falls for our consideration and decision is at what stage of the proceedings should the satisfaction note be prepared by the assessing officer: whether at the time of initiating proceedings under Section 158BC for the completion of the assessments of the searched person under Section 132 and 132A of the Act or during the course of the assessment proceedings under Section 158BC of the Act or after completion of the proceedings under Section 158BC of the Act. 40. The Tribunal and the High Court are of the opinion that it could only be prepared by the assessing officer during the course of the assessment proceedings under Section 158BC of the Act and not after the completion of the said proceedings. The Courts below have relied upon the limitation period provided in Section 158BE(2)(b) of the Act in respect of the assessment proceedings initiated under Section 158BD, i.e., two years from the end of the month in which the notice under Chapter XIV-B was served on such other person in respect of....
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....e period of limitation for preparation the satisfaction note under Section 158BD and consequent issuance of notice to the other person. 43. In the lead case, the assessing officer had prepared a satisfaction note on 15.07.2005 though the assessment proceedings in the case of a searched person, namely, S.K. Bhatia were completed on 30.03.2005. As we have already noticed, the Tribunal and the High Court are of the opinion that since the satisfaction note was prepared after the proceedings were completed by the assessing officer under Section 158BC of the Act which is contrary to the provisions of Section 158BD read with Section 158BE(2)(b) and therefore, have dismissed the case of the Revenue. In our considered opinion, the reasoning of the learned Judges of the High Court is contrary to the plain and simple language employed by the legislature under Section 158BD of the Act which clearly provides adequate flexibility to the assessing officer for recording the satisfaction note after the completion of proceedings in respect of the searched person under Section 158BC. Further, the interpretation placed by the Courts below by reading into the plain language of Section 158BE(2)....
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....icer of the person searched is mandatory and it has to precede the initiation of proceedings against the other person (not searched). 30. Now, if we look into the satisfaction note in the file of the searched person namely, Model Construction Pvt. Ltd. It is abundantly clear that there is no recording of satisfaction by the Assessing Officer that the document seized during the search at the premises of Model Construction Pvt. Ltd. Belongs to the assessee and were incriminating in nature. In our view, unless there is a recovery of the document belonging to the other person, section 153C of the Act cannot trigger. It is sine qua non that the Assessing Officer of the searched person should record the satisfaction in his file and the satisfaction should not only records that the document seized belongs to the other person but he is also required to mention that the document so recovered are incriminating in nature. In the present case there is neither the recording of satisfaction by the AO of the searched person that the documents belong to the other person nor there is any finding that the documents so found were incriminating in nature. In our view a detailed scheme has been prov....
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....bsp; SUBMITED BY Ld DR. PAPER BK. SR.NO. Document Pertains to NATURE OF DOCUMENT AMOUNT DATE 13 Vanda Afonso 6-Year NSC Certificate 5000 3/29/2010 14 Vanda Afonso 6-Year NSC Certificate 5000 3/29/2010 15 Vanda Afonso 6-Year NSC Certificate 5000 3/29/2010 16 Vanda Afonso 6-Year NSC Certificate 5000 3/29/2010 17 Vanda Afonso 6-Year NSC Certificate 5000 3/29/2010 18 Vanda Afonso 6-Year NSC Certificate 5000 3/29/2010 19 Vanda Afonso 6-Year NSC Certificate 5000 3/29/2010 20 Vanda Afonso 6-Year NSC Certificate 5000 3/29/2010 21 Vanda Afonso 6-Year NSC Certificate 5000 3/29/2010 22 Vanda Afonso 6-Year NSC Certificate 5000 3/29/2010 23 Vanda Afonso 6-Year NSC Certificate 5000 3/29/2010 24 Vanda Afonso 6-Year NSC Certificate 5000 3/29/2010 25 Vanda Afonso 6-Year NSC Certificate ....
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....zed document. 37. In terms of the directions of the Hon'ble High Court, we hereby decide the verification of the jurisdictional parameter for initiation of proceedings u/s.153C of the Act in favour of the assessee and against the revenue. 38. In the result, all the appeals of the revenue i.e. IT(SS)A Nos.23 to 27/PAN/2015 & ITA No.413/PAN/2015 are dismissed, whereas the cross objections filed by the assessee i.e. CO Nos.91 to 95/PAN/2016 are allowed. Order pronounced in the open court on 07/10/ 2021. ============= Document 1 Office of the Commissioner of Income Tax (DR), Income Tax Appellate Tribunal, Ground Floor, Pundalik Niwas, Rua de Ourem, Near Patto Foot Bridge, Phone No-0832-2432916 Panaji(Goa) F.No. Info./CIT(DR)/ITAT/Panaji/2021-22 To, The Hon'ble Members, ITAT, Panaji Bench at Pune Respected Sir, Fax No. 0832-2432916 Dated: 06/10/2021 Sub: Satisfaction notes in Peter Vaz/Models groups of cases- reg. Ref: Sl.No. 1-46 in cause list for 04.10.2021 ***** This is to inform that I have forwarded to your honor the letters of the DCIT, Central Circle, Panaji dated 01.09.2021 and of DCIT, Circle (1), Panaji dated 02.....