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Income Tax Appellate Tribunal, DELHI ‘E’ BENCH,
Before: SHRI N.K. BILLAIYA, & SHRI YOGESH KUMAR
PER N.K. BILLAIYA, ACCOUNTANT MEMBER:-
This appeal by the Revenue is preferred against the order of the CIT(A) - IV, Kanpur dated 25.06.2018 pertaining to Assessment Year 2009-10.
The grievances of the Revenue read as under:
“1. Whether on facts and circumstances of the case and in law, the Ld. CIT(A) erred in law while holding that there was no incriminating material for the issuance of notice u/s l53C without appreciating that in the satisfaction note the AO had clearly brought out all the facts and circumstances, which indicated that the names of the entities including the assessee, appearing on seized documents were in the nature of accommodation entries only for routing the undisclosed income of M/s golf Link Hospitality Pvt. Ltd. and hence such documents constituted “ incriminating material” which had a bearing on assessment of income for the purpose of the issue of notice u/s 153C in the context of assessee as per amended provisions w.e.f. 01.04.2005.
2. Whether on facts and circumstances of the case and in law, the Ld. CIT(A) erred in law while holding that the seized balance sheet of M/s Golf Link Hospitality Pvt. Ltd. did not constitute ‘•incriminating material” on grounds that the balance sheet was part of regular books, without appreciating that since all the searched entities of M/s Golf Link Hospitality Pvt. Ltd. were found to be engaged in routing the unaccounted funds by layering through various entities including assessee, controlled by them as mentioned in the satisfaction note, therefore the mere fact that the entries were recorded in regular balance sheet of the beneficiary
could not by itself allow the treatment of such seized documents as non-incriminating having no bearing on assessment of income in the context of entities providing accommodation entries i.e. assessee as the expression used in 153C is in relation to” person other than the searched person.
3. Whether on facts and circumstances of the case and in law, the Ld. CIT(A) erred in law while holding that the seized balance sheet of M/s Golf Link Hospitality Pvt. Ltd. did not constitute “incriminating material” on grounds that the balance sheet was part of regular books, without appreciating that whether the material is incriminating or not, is to be seen in context of totality of facts and circumstances and in the context of the facts whether it has a bearing on assessment of income & person in whose hands such entries in the documents represent the unexplained income.
4. Whether on facts and circumstances of the case and in law, the Ld. CIT (A) erred in law while holding that there was no incriminating material for the issuance of notice u/s 153C, without appreciating that while recording the satisfaction for issue of 153C the test for “incriminating material” having a bearing on assessment of income has to be only in nature of prima facie belief based on some material having live nexus and not in the nature of absolute evidence established after detailed investigation of facts or law.
Whether on facts and circumstances of the case and in law, the Ld. CIT (A) erred in applying the decision of the Hon’ble Supreme Court in the case of M/s Sinhgad Technical Education Society, which was distinguishable on the facts and law of the present case. The aforesaid decision of Hon’ble Supreme Court in the context of period before 01.04.2005, when the provisions of section 153C of the Act were different from what they are after 01.04.2005. Prior to 01.04.2005, there was no mention of any relevancy of material to the process of assessment of income and it was in their context. The Hon’ble Supreme Court held that notice u/s 153C could be issued only when incriminating material is found. However, after 01.04.2005, amended section 153C, specifically laid down the nexus of material, which has bearing on determination of income and , therefore, in view of the express provisions u/s 153C, the condition to be fulfilled is that such material even recorded in books of account can have bearing on determination of income of person u/s 153C.
The order of the CIT (A) is erroneous in law and on facts of the case and is liable to be set aside and the order of the AO be restored.”
Briefly stated, the facts of the case are that a search and seizure operation u/s 132 of the Income-tax Act, 1961 [hereinafter referred to as 'The Act'] was conducted on 27.11.2014 in the case of Maconns Meenu and Yadav Singh Group, Noida covering its business premises and residences of the directors and their family members and other business associates concern and other key persons.
During the course of search proceedings at the residence of one Shri Abhay Maheshwari, a laptop was found and seized. From the scanning of seized data, it was found that M/s Golf Link Hospitality Pvt Ltd has obtained unsecured loan, share application money and share capital from various doubtful entities. The assessee is one of them.
Accordingly, proceedings u/s 153C of the Act were initiated against the assessee and from the perusal of copy of return and details available on record, the Assessing Officer found that the assessee has received share premium of Rs. 25 lakhs, share application money amounting to Rs. 1,81,24,564// and a sum of Rs. 1,10,70,848/- has been shown as liability on account of sundry creditors.
5. The assessee was asked to explain the entries and on receiving no plausible reply, addition of Rs. 3,16,95,112/- was made alongwith an addition on account of disallowance of expenditure of Rs. 4,97,160/-.
6. The assessee agitated the matter before the ld. CIT(A) contending that the entire addition is devoid of any incriminating material found during the course of search and, therefore, assessment framed u/s 153C of the Act is bad in law and without jurisdiction.
The ld. CIT(A) asked the Assessing Officer to submit a remand report in respect of the issues raised by the assessee. The Assessing Officer submitted his report vide letter dated 23.02.2018 which is extracted by the ld. CIT(A) at page 5 of his order.
After considering the remand report and the submissions of the assessee, the ld. CIT(A) was convinced that the ratio laid down by the Hon'ble Supreme Court in the case of Singhad Technical Education Society 397 ITR 344 squarely apply on the facts of the case and further drawing support from the decision of the Hon'ble Delhi High Court in the case of Index Security Pvt Ltd 86 Taxmann.com 84, the ld. CIT(A) categorically decided the appeal in favour of the assessee by holding that the entire assessment is devoid of any incriminating material found at the time of search and annulled the assessment order.
Before us, the ld. DR placed strong reliance on the findings of the Assessing Officer and vehemently stated that the ld. CIT(A) has wrongly applied the ratio laid down by the Hon'ble Supreme Court in the case of Singhad Technical Education Society as the relevant provisions of the Act have been amended thereafter.
Per contra, the ld. counsel for the assessee reiterated what has been stated before the lower authorities.
We have given thoughtful consideration to the orders of the authorities below. The impugned Assessment Year is Assessment Year 2009-10 and whatever reference of the incriminating material made by the Assessing Officer refers to the background found in the laptop of Shri Abhay Maheshwari and same pertains to the F.Y. 2011-12 relevant to Assessment Year 2012-13, which is evident from the satisfaction note.
This means that there does not exist any incriminating material as a result of search, which belonged to, pertained to or related to the assessee for the year under consideration. Therefore, the ratio laid down by the Hon'ble Supreme Court [supra] squarely apply on the facts of the case irrespective of whether there was any amendment in the relevant provisions of the Act.
This view finds further support from the decision of the Hon'ble Delhi High Court in the case of Index Securities Pvt Ltd [supra].
Considering the facts of the case in totality, in light of the decisions discussed hereinabove, we decline to interfere with the findings of the ld. CIT(A).
In the result, the appeal of the Revenue in is dismissed.
The order is pronounced in the open court on 08.08.2022.