TaxTMI 
TaxTMI 
2022 (4) TMI 1381
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 2. Facts of the case, in brief, are that a search operation under section 132(1) of the I.T. Act, 1961 was conducted in AMQ Group of cases on 15.02.2014. During the course of search proceedings and post search enquiry, it was found that Mr. Jean Louis Deniot, French architect and designer and his companies M/s Design 39 Inc. and M/s Cabinet Jean Louis Deniot have rendered services for designing, decorating and renovation of palatial farm house named as Manopsy Manor located at 4, Oak Drive, DLF Chattarpur Farm, Delhi. According to the A.O, this farm house is used as residence of assessee i.e., Sh. Moin Akhtar Qureshi and his family who has occupied it as a Director of M/s AMQ Agro India Pvt. Ltd. which, in turn, has taken this farm house on lease from M/s Impres Estates Pvt. Ltd. which is the owner of the said farm house. The A.O. further noted that during the course of search proceedings on 15.02.2014, Mr. Jean Louis Deniot was present at the search premises at the farm house and was also examined on oath wherein he admitted that he had provided interior designing services for furnishing the farm house but had not charged any money for the services. As per AO, Mr. Jean Louis D....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the documents/evidence extracted from the seized records observed that the employees of Mr. Jean Louis Deniot, who were associated with this project, were sending decoration quotes through emails on regular basis to the employees of Mr. Moin Akhtar Oureshi during the currency of the project. These emails clearly evidence that Mr. Jean Louis Deniot was regularly paid by Mr. Moin Akhtar Qureshi for the decoration/services rendered in the farm house. He also observed that major payments were made through hawala/third party settlements abroad mainly through Mr. Lucky Yuan of Hong Kong who was one of the trade associates of M/s Abdul Masjid Qureshi and M/s AMQ Agro India Pvt. Ltd., group entities of the assessee. After analyzing all these documents/evidence, the AO prepared a chart which reflects the entity-wise and year-wise payments made by Mr. Moin Akhtar Qureshi to Mr. Jean Louis Deniot and his two associates companies. 2.3. Despite providing several opportunities by the A.O. to the assessee viz., Mr. Moin Akhtar Qureshi Agent/ Representative Assessee in respect of Mr. Jean Louis Deniot, failed to file return of income for the A.Y. 2009-10. Hence, he completed the assessment on ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ry well seen that the AO has emphatically demonstrated how the incriminating documents/evidence found during the search proceedings, which have been seized as per Annexures mentioned above clearly reflect that in which year, how much amount in foreign currency has been paid to which entity and through whom. Thus, the AO has quantified the amounts of payments made by Mr. Moin Akhtar Qureshi to Mr. Jean Louis Deniot and his two associate companies in respective years as reflected in annexures mentioned above. It has also been mentioned by AO that none of these payments are reflected in regular books of account, therefore, they are unexplained as well as undisclosed. Since these payments have been received by Mr. Jean Louis Deniot and his two associate companies in lieu of quotation/vouchers raised or emails sent by them, clearly the documents/evidence, wherein these transactions are reflected, belong to these three entities only. The reliance of appellant on the decision of Hon'ble Jurisdictional High Court in the case PepsiCo India Holdings vs ACIT (supra) is misplaced as in the same decision Hon'ble Court has cited another example of photocopies of documents, which reflects....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tive years, as mentioned by AO in the chart. The appellant also, while raising the additional grounds and making submissions in support of these grounds has failed to raise any objection on the documents or the transactions reflected therein or determination of year in which they are to be assessed. His objection is generic in nature only wherein without specifying any document or transaction, he has stated that the document/evidence do not belong to him, therefore, conditions as per section 153C are not fulfilled. In view of this, the additional grounds taken by appellant are dismissed and validity of assessment proceedings u/s 153C of the Act is upheld." 3.2. So far as the addition on merit is concerned, the Ld. CIT(A) upheld the action of the A.O. by observing as under : "8. Ground nos. 4 to 6 pertain to the merit of the case against the addition of Rs. 36,95,263/- made by AO. As discussed above, during the assessment proceedings, AO had given several opportunities to appellant to explain the transactions as reflected in the documents/evidence seized during the search proceedings but none of the opportunities was availed by him. Finally, a show cause notice u/s 144 o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ons in support of the additional grounds raised u/s 153C of the IT Act during the course of appellate proceedings on the documents and transactions reflected in the assessment order, whereas contrary to same detailed document wise submissions were filed during the appellate proceedings. 3. That on the facts and circumstances of the case and in law the CIT (A) was not justified in upholding the action of AO in making an addition of Rs. 36,95,263/- by treating the appellant as representative assessee of Jean Louis Deniot on the basis of order passed u/s 163 of the I.T. Act, 1961. 3.1 That the Ld. CIT (A) erred in not considering the submission made by the appellant vide Written Submissions dated 21.02.2018 and further vide letter dated 19.09.2018 that Jean Louis Deniot being a non-resident is entitled to claim the benefit of Article- 15 of the DTAA between India and France and therefore any income accruing to a resident of France is not taxable in India who has not stayed in India for a period of more than 180 days. 3.2 That the Ld. CIT(A) has grossly erred in holding that the appellant failed to make any submission that the provisions of DTAA are applicabl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se, only the income element of such payment was to be taxed and reimbursement of expenses was required to be eliminated. 6.2. With respect to the validity of assessment under section 153C of the I.T. Act, 1961 is concerned, the Learned Counsel for the Assessee submitted that one of the important jurisdictional requirement under section 153C is that the seized document on the basis of which jurisdiction is being assumed must belong to the person other than the searched person i.e the non-resident being assessed to tax in the hands of a representative assessee, as per law applicable to search action prior to the amendment in section 153C. He submitted that the amendment in section 153C modifying this requirement to the words "pertains to or relates to" came into effect from 01.06.2015 and is prospective in nature. The Learned Counsel for the Assessee drew the attention of the Bench to the following documents belonging to Cabinet Jean Louis Deniot/Jean Louis Deniot/ Design 39 Inc. in the satisfaction note. Annex. Page No. Description A-14 1-19 As per details below payment to beneficiary account of Cabinet Jean Louis A-ll Hard Disc Email conversation regar....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., located at the premises in India, in inbox/outbox of the respective employee belongs to non-resident. 6.5. As regards the invoices raised by Jean Louis Deniot/Cabinet Jean Louis retrieved from the emails is concerned, he submitted that having raised the invoice on Mr. & Mrs. Qureshi, the said invoice would be the property of the person on whom it has been raised. Even a copy of the said invoice found in the email of the respective employee would belong to the said employee and not the non-resident. He submitted that what is to be examined is the ownership of the seized material. The authorship of the document or the fact that name of the non-resident individual/entity figure in the document is not relevant. He, accordingly submitted that none of the seized material mentioned in the satisfaction note belongs to the nonresident individual/entity and hence the jurisdictional requirement for assumption of jurisdiction u/s 153C is not met. Thus, the order passed u/s 153C needs to be quashed on this ground alone. In support of the above, he relied on the decision of the Hon'ble Jurisdictional Delhi High Court in the case of Pepsico India Holdings vs., ACIT 50 Taxmann.com 299 (Delhi ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ies. 8. We have considered the rival arguments made by both the sides, perused the orders of the A.O. and the Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find a search and seizure action under section 132 of the Income Tax Act, 1961 was conducted on AMQ Group of cases on 15.02.2014 including the office and residential premises of the assessee. During the course of search and post-search enquiry, it was found that Mr. Jean Louis Deniot, French Architect and Designer and his associates M/s Cabinet Jean Louis Deniot and Design-39 Inc. have rendered services for designing, decorating and renovation of farm house named as Manopsy Manor located at 4, Oak Drive, DLF Chattarpur Farm, Delhi. The said farm house is owned by a separate private limited company namely M/s Impress Estate Pvt Ltd. During the course of search, certain documents/evidences were found on the basis of which the A.O. drew the conclusion that Mr. Jean Louis Deniot and his associates i.e M/s Cabinet Jean Louis Deniot and Design-39 Inc. are in receipt of income directly/indirectly from the assessee for services rendered in India and, h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ctional requirement is that the seized document on the basis of which jurisdiction is being assumed must belong to the person other than the searched person i.e the non-resident being assessed to tax in the hands of a representative assessee, as per law applicable to search action prior to the amendment in section 153C. The amendment in section 153C modifying this requirement to the words "pertains to or relates to" came into effect from 1.06.2015 and is prospective in nature. A perusal of the satisfaction note containing the documents details of which are already reproduced at Para number.6.2 of this order shows that the documents alleged to be belonging to the person other than the searched person can be broadly classified into the following three categories :- A. Hard Disc and contents thereof. B. Print outs of emails retrieved from the hard disc where name of Jean Louis Deniot, Cabinet Jean Louis, Design-39 Inc. is mentioned and also payments to these individuals/entities is mentioned, and C. Invoices sent by Jean Louis Deniot/Cabinet Jean Louis. 8.3. So far as the Hard Disc seized from the premises C-134, Defence Colony, New Delhi and recorded in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ia Holdings Vs. ACIT 50 Taxmann.com 299 (Delhi) has held as under : "15. Secondly, we may also observe that the finding of photocopies in the possession of a searched person does not necessarily mean and imply that they "belong" to the person who holds the originals. Possession of documents and possession of photocopies of documents are two separate things. While the Jaipuria Group may be the owner of the photocopies of the documents it is quite possible that the originals may be owned by some other person. Unless it is established that the documents in question, whether they be photocopies or originals, do not belong to the searched person, the question of invoking Section 153C of the said Act does not arise. 16. Thirdly, we would also like to make 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....I.T. Act, 1961. The ground raised by the assessee challenging the validity of assessment under section 153C of the I.T. Act, 1961 is accordingly allowed. 8.11. Even otherwise on merit also, we find the A.O. as well as the Ld. CIT(A) have categorically held that Jean Louis Deniot is a non-resident. Further the non-resident being a resident of France and rendering independent personal services in the nature of Architectural services is covered by the provisions of Article 15 of the DTAA between India and France which reads as under : "ARTICLE 15 INDEPENDENT PERSONAL SERVICES 1. Income derived by an individual or a partnership of individuals who is a resident of a Contracting State from the performance of professional services or other independent activities of a similar character shall be taxable only in that Contracting State except in the following circumstances when such income may also be taxed in the other Contracting State: a. if he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities; in that case, only so much of the income as is attributable to that fixed base may be taxed in tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... entitled to claim the benefit of Article-15 of DTAA between India and France and, therefore, any income accruing to a resident of France is not taxable in India who has not stayed in India for a period of more than 180 days. 8.14. We find the Hon'ble Delhi High Court in the case of Comverse Networks System India Pvt. Ltd., vs., CIT 48 Taxmann.com 1 (Del.) has held that where a person in respect of whom an Agent is sought to be made the representative-assessee does not attain the status of non-resident from the relevant accounting period, provisions of Section 163 cannot be invoked in such a case. The relevant observations of the Hon'ble Delhi High Court reads as under : 17. Section 160(l)(i) of the said Act makes it clear that the expression "representative assessee" has to seen "in respect of the income of a non-resident". It is obvious that when we construe the expression "income of a non-resident" it has reference to income in a particular previous year/accounting year. The income of that year must be of a non-resident. If that be so, the agent of the non-resident or the deemed agent under Section 163 of the said Act would be the representative assessee. The petitio....