TaxTMI 
TaxTMI 
2019 (3) TMI 1979
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.... amend any / all the grounds of appeal before or during the course of hearing of the appeal. 2. The brief facts of the case are that a search and seizure operation under section 132 of the Income Tax Act, 1961 (in short "Act") was conducted at business premises of Sheela Foam Private Limited on 28.11.2011. The AO observed that the shares held by Pradhuman Patel Group (PP Group) and other Patel Group in M/s Sheela Foam Private Limited were acquired by company M/s Serta India Private Limited (Rahul Gautam Group) during the financial year 2009-10. During the search operation various incriminating evidences were found and seized from the office premises of M/s Sheela Foams Pvt. Ltd. which established beyond doubt that for acquiring such shares by Rahul Gautam Group from the Pradhuman patel Group and others Patel Group, substantial consideration ws paid by the Rahul Gautam Group to the Pradhuman Patel Group and others in cash outside the books of account. AO further observed that the total sale consideration for the shares as held by the Pradhuman Patel Group and other Patel Group in M/s Sheela Foams Pvt Ltd was Rs. 88.90 crores out of which Rs 52.78 crores was paid thrpugh cheques and....
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....), hence the proceedings initiated under section 153C are illegal and without jurisdiction. The assessee also challenged the addition on the merits of the case. The assessee explained the seized documents found from the Sheila foams private limited and stated that they do not 'belong' to the assessee which is a prime condition for making an assessment under section 153C of The Income Tax Act. The assessee also submitted that the addition is not sustainable on merits of the case also for the reason that if any adverse view is to be taken of the material seized from a thirdparty before the same can be used against the assessee, the assessee has a statutory right to cross-examine the owner of the document. The learned CIT(A), noted that the satisfaction note recorded in the case of the assessee is similar to the satisfaction note recorded in the case of Pepsi Foods Private Limited as reproduced in the order of the Honourable Delhi High Court in case of Pepsi foods private limited vs ACIT. He further stated that the AO has not given any 'basis or reason' for his satisfaction that the seized documents belonging to the appellant. He therefore, relies on the ratio of M/s Pepsi foods priva....
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....case do not apply to the facts before the coordinate bench. Even otherwise she stated that the learned Commissioner of Income Tax Appeal has wrongly relied upon the PepsiCo holding decision whose facts are different and distinguished from the facts before the coordinate bench in impugned appeals. She further stated that the transaction and the background of transaction is accepted by the assessee and there is a sufficient material to show that the transactions are entered into by the assessee of earning of unaccounted capital gain. She therefore stated that the matter should go back to the learned CIT-A, for a fresh decision on merits and it is required to be upheld that documents 'belong' to the assesses. 4. On the other hand, the Ld. counsel for the assessee has relied upon the order of the Ld. CIT(A) and submitted that a search and seizure operation in the Sheela Foam Group was conducted as on 28.11.2011. On the basis of certain documents found during the course of search, notice u/s. 153C of the Act dated 29.8.2013 was issued to the assessee. The AO in his order dated 28.3.2014 alleging that an amount of Rs. 1,86,42,733/- were received by the assessee in cash from M/s Serta In....
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....'ble Supreme Court in ACIT & Another V. Pepsi Foods Pvt. Ltd., SLP No. 4659/2015, dt. 04.12,2017, dismissed the SLP and affirmed the view of Delhi High Court, wherein it has been held as under: "11. It is evident from the above satisfaction note that apart from saying that the documents belonged to the petitioner and that the Assessing Officer is satisfied that it is a fit case for issuance of a notice under Section 153C, there is nothing which would indicate as to how the presumptions which are to be normally raised as indicated above, have been rebutted by the Assessing Officer. Mere use or mention of the word "satisfaction'' or the words "I am satisfied'' in the order or the note would not meet the requirement of the concept of satisfaction as used in Section 153C of the said Act. The satisfaction note itself must display the reasons or basis for the conclusion that the Assessing Officer of the searched person is satisfied that the seized documents belong to a person other than the searched person. We are afraid, that going through the contents of the satisfaction note, we are unable to discern any "satisfaction" of the kind required under Section 153C of the said Act. ii. I....
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....d to M/s Nitya Kali Rice Mill and the notice under Section 158BC issued to the Appellant were on the same day i.e., on 09.09.1999, the question of coming to a satisfaction that any undisclosed income based on seized books of accounts or documents or assets belonged to the present Appellant did or could not arise inasmuch as no reasonable or prudent man can come to such satisfaction unless the seized books of accounts or documents or assets are perused, examined and verified. Therefore, the Assessing Officer was right in arriving at a decision that the notice under Section 158BC issued to the present Appellant on 09.09.1999 did not satisfy the requirement of Section 158BD of the IT Act." 2. The seized material referred to in the satisfaction note do not 'belong to' the assessee. i) In CIT V. Renu Constructions Pvt Ltd., Ankit Gupta And Pr. CIT, Delhi V. Ankit Gupta, L/H Manoj Kumar, [2017] 399 ITR 262 (Del), the hon'ble Delhi High Court held as under: 9. Consequently, this Court rejects the contention of the learned counsel for the Revenue that even prior to 1st June 2015 at the stage of initiation of proceedings under Section 153C of the Act, it is sufficient if the seized do....
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....a) that, given the nature of a particular seized document, in the process of recording his. satisfaction, the AO of the searched person may have to note the reasons for his conclusion that the said document does not belong to the searched person but to the other person. v. In PR. CIT-06 Versus Nikki Drugs & Chemicals Pvt. Ltd., [2016] 386 ITR 680, the hon'ble Delhi High Court held as under: "21. The IT AT considered the above contentions and following the decision of this Court in Pepsico India Holdings Pvt. Ltd. v. Assistant Commissioner of Income Tax: (2015) 370 ITR 295 (Delhi) held that the documents in question could not be said to belonging to the Assessee. In Pepsico India Holdings Pvt. Ltd. (supra), this Court has explained that the expression 'belongs to' must not be confused with the expression 'relates to'. As an illustration, this Court has referred to a registered sale deed which, although, registered by the vendor would belong to the purchaser of the property and could not be considered to be belonging to the vendor only because the vendor's name was mentioned in the documents. In the present case, although the photocopies of the documents handed over to SVP Builde....
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....arch, notice u/s. 153C of the Act dated 29.8.2013 was issued to the assessee. The AO in his order dated 28.3.2014 alleging that an amount of Rs. 1,86,42,733/- were received by the assessee in cash from M/s Serta India Pvt. Ltd. for sale of shares of M/s Sheela Foam Pvt. Ltd. We further note that assessee went in appeal before CIT(A) challenging the validity of assessment made in pursuance of notice u/s 153C as well as the merits of the addition. The CIT(A) after considering the detailed submissions made by the assessee and also after a detailed verification in which three remand reports were called from the Assessing Officer, ultimately held that the satisfaction note on the basis of which the assessing officer initiated the proceedings u/s 153C of the Act is bad in law in as much as the same is not a proper satisfaction in terms of various judgments of the jurisdictional High Court as well as the Supreme Court. Further, the documents mentioned in the satisfaction note also do not 'belong to' the assessee. We further note that Ld. CIT(A) has elaborately discussed the issue in dispute in his impugned order at page no. 49 to 57 vide para no. 4 to 4.4, the relevant findings of the....
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....ng search and that "if is seen that the above seized material contains following documents belonging to Smt. Veena Vijay Kumar Malviya"and thereafter the details of the documents have been noted as under: (i) Annexure A-1, P-41, photocopies of paper relating to the settlement statement for the transfer of shares from the Pradhuman Patel group to Rahul Gautam Group; (ii) P- 59 printouts of the e-mail dated 07/10/2009 from Karlik Chandulal Patel of Win-Door Marketing regarding the transfer and deposit of the money of Rs. 1 crore +1.8 crores in his and his family member's various bank accounts as mentioned in the e-mails. (iii) P 57, 58 & 67 print out of e-mail contain bank account details of Veena Vijay Kumar Malviya. The appellant states that on receipt of above documents the assessee filed objection against initiating proceedings under section 153C vide letter dt. 12.01.2014 and 30.1.2014 submitted before the AO denying that any of the above documents belong to the assesse, inter alia mentioning that photocopy of some rough calculation/notings which was unsigned and could not be authenticated as identity of the author of the said paper was never ascertained: these....
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....87 ITR 209 (SC) and Mumbai Bench of the Tribunal in the case of Straptex (India) (P.) Ltd vs. DCIT: 84 ITD 320 and other cases cited wherein it was held that presumption under section 132(4A) of the Act is only against the person in whose possession search material is found and not against any other person. It was further held that the presumption is rebuttable and not conclusive and it cannot be applied in the absence of corroborative evidence. 4.3.2.3 It has also been submitted that in the case of searched party, SFPL, notice u/s 153A was issued on 29.08.2013, and in the case of assessee also notice u/s. 153C has been issued on the same date i.e. 29.08.2013, and that the satisfaction note stating that the impugned documents belong to third party has also been recorded on 29.08.2013 in the case of SFPL; that the AO had never questioned SFPL whether those documents belonged to SFPL or not either prior to 29.08.2013 or on 29.08.2013; SFPL never admitted that these documents do not belong to them; that no enquiry was also done from the assessee for enquiring into the nature and status of such documents w.r.t. assessee; that no finding could had been given holding some documents as ....
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....the assumption of jurisdiction u/s 153C was bad in law and that those seized documents did not belong to the appellant. Appellant has also made submissions on merit. The submissions of the appellant containing their arguments on legal ground as well as on merit are forwarded here with. The AO is requested to submit his comments, on AR's submission relating to both legal ground as well as on merit. He is also requested to cover the following points in his report, which involve ascertainment of facts of the case from assessment and search records: i. What are the evidences which show that the seized documents referred to in the 'Satisfaction Note' have been disowned/denied as belonging to the 'Searched assessee'. ii. What are the evidences on the basis of which it can be held that these documents referred to in the satisfaction note belong to the appellant? iii. The comments and inputs of the AO on the submissions of the appellant that the emails do not belong to the appellant and that even otherwise, the contents of this email are not at all incriminating in nature. The AO vide his letter F.No.ACIT/CC-06/201516/275 dt. 08.06.2015 submit his report/comments ....
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.... were sold to SIPL (Serta) and which indicated that beside payments made by cheque to the, payments in cash were also made. To examine the contentions of the appellant, vide this office letter F.No.CIT(A)-23/2015-16/178 dt. 03.11.2015 the AO was directed to provide copies of all documents and statement recorded of different persons referred to and relied upon by the AO in the assessment order to which the AO vide his letter no. 1268 dt. 30.11.2015 once again refereed to the reply of the AO dt. 27.01.2014 and 30.01.2014 submitted to him during assessment proceedings and quoted the reply of the appellant that "all the papers provided to us and alleged to belonging to us are part of the documents seized from the premise of the searched party (Sheela Group) and these papers do not belong to us" which while being contradictory to his earlier reply dt.08.06.2015,and further mentioned at para 4.3 that the AO had not relied upon the statements of Sh. Praduman Patel and Sh. Rahul Gautam in the assessment order which is factually incorrect as mentioned at para 3 page 2 and para 6 page 12 and 13 of the assessment order. Thereafter vide this office letter no. 1246 dt. 15.12.2015 the AO was spe....
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....FPL notices u/s 153C of the Act were issued to the Praduman Patel Group, Himanshu Patel group, Varsha Patel, and the Kartik Patel group as well as to SIPL. The DCIT Central Circle- 11, New Delhi passed assessment order u/s 153C of the Act on 25.03.14 for AY 2010- 11 making therein the addition of the entire amount of Rs. 36,09,75,891/- in the case of SIPL being the alleged cash payments in lieu of the shares of SFPL purchased by SIPL as against Rs. 36,10,53,838 mentioned in the seized document Pg-41 of Annx-A1. However, SIPL had merged in SFPL w.e.f 01.04.2010 vide order of the Hon'ble Delhi Court dt. 18.10.2011. Accordingly, the Lnd. CIT(A)-31, New Delhi vide his order dt. 31.10.2014 in appeal no. 338/14-15 for AY 2010-11 quashed the order of the AO in the case of SIPL holding that the company was not in existence as on 01.04.2010 following the decision of Spice Infotainment Ltd. vs CIT (2012) 247 CTR 500 (Del) and other decisions. Copy of the assessment order and the CIT(A)'s order have been filed. As submitted by the appellantt's AR, the department has not filed 2nd appeal in view of the fact of non-existence of the SIPL as on 01.4.2010. In fact, the appeals of AYs 26-07 to 2012....
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....mentions the family members of the appellant group with entries of Rs. 12.75 crore due to them for 1427280 shares held by them, and out of consideration 'A' Rs.7.30 crore paid and balance of Rs.5.45 crore and out of consideration B' of Rs.4.25 crore due, Rs.45 lakh paid and Rs.3.80 crore due. I have examined the seized documents as per Annx.-A5, A7, A8 which are notings in diaries not relevant and not referred/utilized in the assessment order as well as pages 12-35 of Annx.-A2 provided to the appellant by the AO and submitted by the appellant. Pages 15-21 of A2 are receipts dt. 20.12.2009 on revenue stamp given by Sh. Praduman Patel on behalf of himself and that of Smt. Urmila Patel and Sh. Himanshu Patel (both HP group) for payments received from Sh. Rahul Gautam by cheque, pages 27-34 are similar receipts from PP and those of Smt. Renu Patel, Sh. Rohan Patel and Sh. Krish Patel (all of PP group) of payments received by cheque, and pages 22-25 are photocopies of cheques issued to them by Sh. Rahul Gautam. 4.3.8 Thus, in none of the seized documents except for page 41 of Annx.-A1 as mentioned above, there is any reference to payments related to the appellant group nor of any ca....
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....the PB filed on 27.02.2015 which was provided to the appellant vide vl 'AO's letter F.No.DCIT/CC-11/201314/1634 dt. 06.01.2014 enclosing therewith the satisfaction note and pages 41, 57 to 58 and 67 of Annx-1 seized from SFPL. Beside the issue of whether these documents "belong to" the appellant and the application of mind on the implication of these'ftdcOments on undisclosed income of the appellant, the satisfaction note enclose with his notice is unsigned, there is no^mention of date of satisfaction and the assessment year, while the satisfaction is stereotype in all the TTve cases'Sf'the Kartik Patel family group. On the other hand in the assessment folder the same the same satisfaction note, dt. 29.08.2013 for AYs 2006-07 to 2011-12 and duly signed was found on the note sheet side of the folder (after the note sheets) both this satisfaction notes were forwarded to the AO vide this office letter no. 1269 dt. 06.01.2016 with the following observations: "2. I have perused the assessment folders of these cases forwarded by you with your letter F.No.ACIT/CC06/15-16/1459 dated 30.12.2015. I find that the satisfaction recorded u/s 153C of the Act placed on the note sheet sid....
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....Kartik Patel and as page 4 and 6 respectively in the case of Smt. Meenakshi Patel and M/s Kartik Chandulal Patel HUF (in fact the satisfaction in the file of Sh. Kartik Pate! is that of Smt. Meenakshi Patel) - and the correspondence sheets are marked up to pages 187, 411, 192, 194 and 187 respectively which do not include tne satisfaction note on the correspondence side. Besides, on the satisfaction note, both X1 & X2, the name of the searched company M/s Sheela Foam Pvt Ltd is noted on top, meaning thereby that the satisfaction was recorded in the case of SFPL on 28.08.2013 when notice u/s 153A was issued to SFPL, but there is no satisfaction recorded in the case of the appellants (Kartik Patel Group hamily members). In this view of the matter, and in terms of the AO's reply that "the undersigned is unable to explain the unsigned/undated copies of satisfaction notes as claimed by the assessee", the satisfaction enclosed with the AO's letter F.No.DCIT/CC- 11/2013-14/1634 dt. 06.01.2014 sent to the appellant cannot be considered as valid satisfaction of the AO. Since the AO has mentioned in his reply dt. 14.01.2016 that "The assessment records as available in this office were sent....
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....ndir (P.) Ltd. [2015] 58 taxmann.com 293 (Delhi - Trib.); Tanvir Collections (P.) Ltd. v. Assistant Commissioner of Income Tax, Central Circle-21, New Delhi [2015] 54 taxmann.com 379 (Delhi - Trib.); Deputy Commissioner of Income-tax , Central Circle-5, New Delhi v. Qualitron Commodities (P.) Ltd. [2015] 54 taxmann.com 295 (Delhi - Trib.). In Director of Incometax (IT)- II v. Ingram Micro (India) Exports (P.) Ltd [2015] 60 taxmann.com 57 (Bombay) the Hon'ble Bombay High Court have also held that once it was found that there was nothing in assessment order which would indicate that Assessing Officer arrived at satisfaction that seized material pertained to assessee, Tribunal was justified to nullify proceedings and also the decision of the ITAT, 'F' Bench, New Delhi dated 31.12.2018 in similar case in ITA No. 1455-1459/Del/2015 (AY 2010-11) in the case of ACIT vs. Rohan Patel; Himanshu Patel; Praduman Patel; Krish Patel and Urmilla Chandulal Patel. We further find that as regards the satisfaction note is concerned, the assessee had filed a copy thereof at page 11 to 17 of the PB filed on 27.02.2015 which was provided to the appellant vide 'AO's letter F.No. DCIT/CC-11/201314/1634 dt....
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....mand report stands submitted vide this office letter dated 04.01.2016. Regarding two sets of satisfaction note, it is submitted that the assessments under consideration were completed by predecessor of the undersigned. The assessment records as available in this office were sent as desired by your goodself. Thus, the undersigned is unable to explain the unsigned/undated copies of satisfaction notes as claimed by the assessee." 5.3 Thus, it is seen that the impugned satisfaction note provided to the assessee vide AO's letter F.No.DCIT/CC-11/2013-14/1634 dt. 06.01.2014 (X1) was unsigned, with no date indicating the date on which satisfaction was drawn, and with no mention of the assessment year for which satisfaction was drawn, while the satisfaction found in the assessment folder is on the note sheet side (X2) - with no page marking on the satisfaction prior to 06.01.2016 when the assessment folders were sent back to the AO by me, but subsequently found marked as page 5 in the case of the appellant and that of Sh. Kartik Patel and Sh. Abhishek Kartik Patel and as page 4 and 6 respectively in the case of Smt. Meenakshi Patel and M/s Kartik Chandulal Patel HUF (in fact the satisfac....