TaxTMI 
TaxTMI 
2022 (4) TMI 231
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....he AO u/s.68 on account of loans received by the Appellant. 2. Ld. CIT(A) erred in confirming the addition of Rs. 2,52,000/- made by the AO u/s.68 on account of gifts received by the appellant. The addition is not justified. 3. Without prejudice to above grounds of appeal, the AO erred in invoking section 153C and in passing assessment order. The notice u/s.153C issued by the AO and the consequent assessment order is illegal, without jurisdiction, not in accordance with law. 4. The appellant reserves the right to add, amend or alter any of the above grounds of appeal." 2. Search proceedings u/s 132(1) of the Act were conducted on Shri Ramesh Kedia and others on 23.02.2006. Notice under Sec. 153C of the Act was issued to the assessee. In compliance the assessee returned the same income as was disclosed by him in his Original return of income filed on 31.03.2005 u/s. 139(1) of the Act. During the course of assessment proceedings, it was observed by the Assessing Officer that the assessee during the year under consideration had claimed to have raised unsecured loans aggregating to Rs. 10 lacs from ten persons, as under: Sl. No. Name and address of t....
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.... of search proceedings conducted at the premises of said Seth Banshidhar Kedia Rice Mills. Pvt. Ltd., Baloda bazaar, the statements of some of the employees were recorded wherein they had expressed their ignorance as regards the bank accounts, income-tax returns etc. in their name that had surfaced during the course of the search proceedings. Holding a conviction that the assessee's unaccounted money had been routed through the bank accounts of the aforementioned employees of the assessee's father, viz. Shri. Ramesh Kedia (supra), the A.O held the impugned loans of Rs. 10 lacs as unexplained cash credit u/s.68 of the Act. It was also observed by the Assessing Officer that the assessee had claimed to have received three gifts in cash during the year under consideration, as under : Sr. No Particulars Amount 1. Shri.DeenDayalDadsena Rs. 50,000/- 2. Shri Shankar Prasad Agrawal Rs. 1,01,000/- 3. Smt. ReenaAgarwal Rs. 1,01,000/- Observing that the assessee had not placed on record the copies of the bank accounts or the cash flow statements of the aforesaid donors which could substantiate the availability of cash-in-hand with them on the respective d....
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.... in the gift deeds and had claimed that they were being assessed to tax, but they had not filed the copies of their returns of income. It was also observed by the CIT(Appeals) that considering the petty income of the aforesaid donors it was beyond comprehension as to how the respective gifts could have been given by them to the assessee. In the back drop of his aforesaid observations, the CIT(Appeals) holding a conviction that the impugned gifts transactions were nothing but accommodation entries through which the assessee had introduced his undisclosed income in his capital account upheld the view taken by the A.O . 4. The assessee being aggrieved with the order of the CIT (Appeals) had carried the matter before us. 5. We have heard the ld. Authorized Representative of both the parties, perused the material available on record and the orders of the lower authorities, as well as considered the judicial pronouncements that have been placed into service by them to drive home their respective contentions. At the very outset of the hearing of the appeal the Ld. Authorized Representative (in short 'AR') for the assessee had assailed the validity of jurisdiction that was assumed by....
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.... represented the unaccounted money of Shri. Ramesh Kedia i.e. assessee's father, therefore, the same by no means could have been held as the undisclosed income of the assessee. It was further submitted by the Ld. AR that the 'onus' cast upon the assessee to substantiate the genuineness and veracity of the loan transactions in question was duly discharged by him by placing on record supporting documentary evidences which had not been rebutted by the department. In order to drive home his aforesaid claim the Ld. AR had taken us through the confirmations of the lenders, copies of their respective returns of income a/w computations of income, copy of capital account, balance sheet etc. Further, in order to substantiate the genuineness and veracity of the gift transactions the Ld. AR had drawn our attention to the confirmations of gifts of the respective donors and the copies of their returns of income a/w. balance sheet and capital account of one of the donor, viz. Shri Deen Dayal Dadsena. Backed by his aforesaid contentions, it was submitted by the Ld. AR that not only the Assessing Officer had wrongly assumed jurisdiction and framed the assessment vide his order u/s.143(3) r.w.s.153C....
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....cial pronouncements that have been pressed into service by the ld. A.R to drive home his contentions. As the Ld. AR has assailed the validity of the jurisdiction assumed by the Assessing Officer for framing the impugned assessment u/s. 143(3) r.w.s.153C of the Act, therefore, we would first deal with the same. As observed by us hereinabove, it is the claim of the Ld. AR that as no incriminating material/document "belonging" to the assessee was found during the course of the search proceedings conducted on 23.02.2006 at the premises of Shri Ramesh Kedia and others, therefore, the Assessing Officer had travelled beyond the scope of his jurisdiction and wrongly framed the assessment u/s. 143(3) r.w.s.153C of the Act. On being confronted with the aforesaid claim of the assessee's counsel the Ld. DR could not rebut the same. It is in the backdrop of the aforesaid factual matrix that we shall herein proceed with and deal with the validity of the jurisdiction assumed by the Assessing Officer for framing the assessment vide his order u/s.143(3) r.w.s.153C, dated 31.12.2007. 8. Before adverting any further, it would be relevant to cull out the provisions of Sec. 153C i.e pre-amended (i.e....
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....n the backdrop of our aforesaid observations, we are of the considered view that though the assumption of jurisdiction by the AO under Sec. 153C on the basis of impugned information pertaining to or relating to the assessee in the documents seized during the course of the search proceedings conducted on a third party would be well in order under the post-amended provisions (i.e as applicable w.e.f 01.06.2015), however, but de hors the 'belonging' of such seized documents by the assessee the A.O could not have validly assumed jurisdiction under the pre-amended Sec. 153C (i.e prior to 01.06.2015). Our aforesaid view is fortified by the following judicial pronouncements: (i). CIT Vs. Arpit Land (P) Ltd.(2017)78 393 ITR 276 (Bom) : It was observed by the Hon'ble High Court that as per the preamended Sec. 153C of the Act (i.e prior to 01.06.2015), the proceedings could only be initiated against the assessee i.e a person other than the person searched, only if the document seized during the course of the search proceedings belonged to such other person. It was observed by the Hon'ble High Court, as under: "6. We note that in terms of Section 153C of the Act at the relevant....
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....tisfaction of the condition precedent viz. the seized document must belong to the respondent - assessee is a jurisdictional issue and non satisfaction thereof would make the entire proceedings taken there under null and void. The issue of Section 69C of the Act can only arise for consideration if the proceedings under Section 153C of the Act are upheld. Therefore, in the present facts, the issue of Section 69C of the Act is academic. 8. In view of the above reasons and particularly the finding of fact that seized document which forms the basis of the present proceedings, do not belong to the petitioner and the same not being shown to be perverse, the question as raised does not give rise to any substantial question of law and thus not entertained." (ii) PCIT(Central)-2 Vs. Index Securities Pvt. Ltd. (2017) 86 taxmann.com 84 (Delhi) It was observed by the Hon'ble High Court of Delhi that the essential jurisdictional requirement for assumption of jurisdiction under Sec. 153C of the Act (as it stood prior to its amendment with effect from 1st June, 2015) qua the 'other person' was that the seized document forming the basis of the 'satisfaction note' must not merely 'per....
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....documents seized were the trial balance and balance sheets of the two Assessees for the period 1st April to 13th September 2010 (for ISRPL) and 1stApril to 4th September 2010 (for VSIPL). Both sets of documents were seized not from the respective Assessees but from the searched person i.e. Jagat Agro Commodities (P) Ltd. In other words, although the said documents might 'pertain' to the Assessees, they did not belong to them. Therefore, one essential jurisdictional requirement to justify the assumption of jurisdiction under section 153C of the Act was met in the case of the two Assessees." (emphasis supplied by us) (iii). PCIT Vs. Vinita Chaurasia (2017) 394 ITR 758 (Del) : Adopting a similar view the Hon'ble High Court of Delhi had observed that as per the pre-amended Sec. 153C (i.e prior to 01.06.2015), it was obligatory on the part of the revenue to show that the document seized during the course of the search proceedings belonged to the assessee i.e a person other than the person searched, and it was not open for the revenue to point out that the document in question pertained to or related to the assessee. It was observed by the Hon'ble High Court, as un....
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....ved by the High Court that the "satisfaction note" itself must display the reasons or basis for the conclusion that the Assessing Officer of the searched person was satisfied that the seized documents belonged to a person other than the searched person. The Hon'ble High Court while concluding as hereinabove had held as under: "5. We have considered the submissions made by the counsel for the parties. Before proceeding any further it would be necessary to set out the relevant provisions of the said Act as applicable to the assessment years under consideration:- "153C. (1) Notwithstanding anything contained in section 139, section 147, section148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person 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....
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.... in the course of a search under section 132 or survey under section 133A, it may, in any proceeding under this Act, be presumed- (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; xxxxxxxxxxxxxxxx" 6. On a plain reading of Section 153C, it is evident that the Assessing Officer of the searched person must be "satisfied" that inter alia any document seized or requisitioned "belongs to" a person other than the searched person. It is only then that the Assessing Officer of the searched person can handover such document to the Assessing Officer having jurisdiction over such other person (other than the searched person). Furthermore, it is only after such handing over that the Assessing Officer of such other person can issue a notice to that person and assess or reassess his income in accordance with the provisions of Section 153A. Therefore, before a notice under Section 153C can be issued two steps have to be taken. The first step is that the Assessing Officer of the person who is searched must arrive at a clear satisfaction that a document seized from him does not b....
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....different from Section 153C. Under Section158BD the Assessing Officer's satisfaction is with regard to "undisclosed income‟ belonging to a person other than the searched person. It is obvious that such satisfaction under Section 158BD by its very nature has to be prima facie and tentative. The same methodology cannot be imported into Section 153C where, in our view, the Assessing Officer is required to arrive at a conclusive satisfaction that the document belongs to a person other than the searched person because such Assessing Officer has to rebut the normal presumptions which are suggested by the statute under Sections 132(4A)(i) and 292C(1)(i) of the said Act. Therefore, the decision of the Allahabad High Court in the case of Classic Enterprises (supra) would not come to the aid of the Revenue. 8. Insofar as the decision in the SSP Aviation Ltd. (supra) is concerned we do not find anything therein which militates against the view that we are taking. In fact the very distinction between Section 153C and 158BD (although Section 158BD is not mentioned) is indicated by the following observations of the Division Bench in SSP Aviation Ltd. (supra):- "It needs t....
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....ch investigation, summonses were issued to M/s Pepsi Foods Pvt. Ltd. to furnish certain details. The complete details were not furnished. The following documents were also found and seized during the course of search and seizure action u/s 132(1) of I.T. Act, 1961belonging to (PFL) M/s Pepsi Foods Pvt. Ltd. (PAN:AAACP1557E) over which the jurisdiction lies with the undersigned: Ann/Page No. Description of Annexure C-4/A-2/77 This page contains summary of PFL Claims as on29-11-2011 (Claims upto 31/10/2011) C-4/A-4/18-20 These pages contain a detail of DVAT impact (April'10 - June'10) Vs PFL Support report and MRP Plan. C-4/A-4/21-23 These pages contain a details of discount per C/SPDL VS PFL. C-4/A-4/27 These pages contain a details of discount per C/SPDL VS PFL. C-4/A-5/54 This page contains details of concentrate stock summary as on 31.12.2010. C-4/A-5/99 This page contains a summary of PFL Claims as on 8/9/2011. Claims upto 31/8/2011. C-4/A-5/100 This page contains a detail of PFL Support year2011 Accordingly, section 153C of the I.T. Act, 1961 is applicable to M/s Pepsi Foods Pvt. Ltd. which state that "where an A....
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....psico India Holdings Pvt. Ltd. Vs. ACIT &Anr. (2015) 370 ITR 295 (Del): In the aforesaid judgment the Hon'ble High Court of Delhi reiterated the view that was earlier taken by it in the case of Pepsi Foods Pvt. Ltd.(supra). It was observed by the High Court that unless and until it is established that the 'document' in question do not belong to the searched person, the provisions of Section 153C of the said Act would not get attracted because the very expression used in Section 153C of the said Act is that "where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A ....". In view of this phrase, it was observed that before the provisions of Section 153C are invoked, the Assessing Officer of the searched person must be satisfied that the seized material (which includes documents) does not belong to the person referred to in Section 153A (i.e., the searched person). It was further observed, that the assessing officers should not confuse the expression "belongs to" with the expressions "relates t....
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.... 16. Thirdly, we would also like to make it clear that the assessing officers should not confuse the expression "belongs to" with the expressions "relates to" or "refers to". A registered sale deed, for example, "belongs to" the purchaser of the property although it obviously "relates to" or "refers to" the vendor. In this example if the purchasers premises are searched and the registered sale deed is seized, it cannot be said that it "belongs to" the vendor just because his name is mentioned in the document. In the converse case if the vendors premises are searched and a copy of the sale deed is seized, it cannot be said that the said copy "belongs to" the purchaser just because it refers to him and he (the purchaser) holds the original sale deed. In this light, it is obvious that none of the three sets of documents - copies of preference shares, unsigned leaves of cheque books and the copy of the supply and loan agreement - can be said to "belong to" the petitioner. 17. In view of the foregoing discussion, we do not find that the ingredients of Section 153C of the said Act have been satisfied in this case. Consequently the notices dated 02.08.2013 issued under Sect....