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Income Tax Appellate Tribunal, INDORE “SMC” BENCH, INDORE
Before: SHRI KUL BHARAT
आदेश / O R D E R PER KUL BHARAT, J.M: This appeal by the assessee pertaining to the assessment year 2010-11 against the order of
[ITA 735/Ind/2018] [Smt. Sadhna Vohra, Bhopal] Commissioner of Income Tax (A)-1, Bhopal dated 27.6.2018. The assessee has raised following grounds of appeal:
1. That on the facts and in the circumstances of the case, the learned CIT(A) erred in not considering that the notice issued u/s 153C and the reasons recorded for issuing such notice are not valid and proper on the basis of which action u/s 153C can be taken.
That on the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the addition of Rs.4,08,131/- made u/s 69 of the Act for undisclosed investment in purchase of land without considering the explanation offered by the appellant and without appreciating the facts that the investment was made by proper sources and nothing is unexplained. 3. That the appellant craves leave to add, to urge, to alter or to amend any of the ground of appeal
on or before the date of hearing.
2. The facts giving rise to the present appeal are that a search & seizure action u/s 132 of the Income Tax Act, 1961 (hereinafter called as ‘the Act’) was carried out at the premises of M/s. Fortune Builder and M/s. Fortune Soumya Housing, Bhopal on 30.11.2012. During the course of search various documents were seized from the searched premises belonging to the assessee. A statement of the assessee u/s 131 of the Act on 30.4.2013 was also recorded, wherein she had admitted that she had sold 3 2
[ITA 735/Ind/2018] [Smt. Sadhna Vohra, Bhopal] acres of land in M/s. Fortune Soumya Housing, Bhopal on 9.8.2011 for Rs.61 lakhs. Notice u/s 153C of the Act was issued and the assessment u/s 153C r.w.s. 143(3) of the Act was framed. During the course of assessment proceedings, the A.O. observed that the assessee had purchased some land on 4.6.2009 from 3 persons for a total consideration of Rs.4,08,131/-. The A.O. not finding the explanation of the assessee acceptable, made addition of Rs.4,08,121/- as unexplained investment u/s 69 of the Act. Aggreived against this, assessee preferred an appeal before Ld. CIT(A), who after considering the submissions sustained the addition. Against this, the assessee is in present appeal before this Tribunal. The present appeal is barred by 7 days. The assessee has filed an application along with an affidavit seeking condonation of the delay. It is stated that due to illness of the assessee, the appeal
[ITA 735/Ind/2018] [Smt. Sadhna Vohra, Bhopal] could not be filed in time. The assessee has also filed a certificate by Dr. Ajay Thete.
Ld. D.R. opposed the application. However, looking to the submissions made in the application and medical certificate so furnished, we are of the view that the assessee was having a reasonable cause for filing appeal belatedly. The delay of 7 days is condoned. Appeal is admitted for adjudication.
Ground No.1 is against legality of notice u/s 153C of the Act. Ld. Counsel for the assessee reiterated the submissions as made in the written submissions. It was submitted that the notice issued u/s 153C of the Act is invalid and void-ab-initio as there is no correlation document-wise with the relevant assessment. In support of this, the assessee has placed reliance on the decision of the Hon'ble Delhi High Court rendered in the case of [ITA 735/Ind/2018] [Smt. Sadhna Vohra, Bhopal] Principal CIT(C)-2 Vs. Index Securities (P) Ltd. 86 Taxmann.com 84 (Del.)
Per contra, Ld. D.R. opposed these submissions and supported the order of the authorities below. He contended that proceedings u/s 153C of the Act has been validly initiated. He submitted that the assessing officer has duly recorded that during the course of search u/s 132 of the Act at the premises of M/s. Fortune Builders and M/s. Fortune Soumya Housing certain documents numbered as LPS-8 belonging to the assessee were found.
He submitted that the assessing officer has further recorded the sale of land admeasuring 3 acres to M/s.
Fortune Soumya Housing, Bhopal for a sale consideration of Rs.61,00,000/-This transaction is duly admitted.
Therefore, he submitted that there is clear co-relation and the assessee has not brought anything on record to rebut this finding. In rejoinder Ld. Counsel for the assessee it is [ITA 735/Ind/2018] [Smt. Sadhna Vohra, Bhopal] contended that the income from capital gains was already offered in return for the A.Y. 2012-13, although this document has no relevance to the assessment year under consideration. This document cannot be treated as incriminating.
I have heard the rival submissions, perused the materials available on records and gone through the orders of the authorities below. The assessee in this case is aggrieved by the proceedings initiated u/s 153C of the Act.
The contention of the assessee is that the proceedings have not been validly initiated. It is contended that the seized document do not relate to the assessment year under appeal, where there is no correlation between the documentwise with the relevant assessment. The notice so issued would be invalid and void-ab-initio. The reliance is placed on the judgement of the Hon'ble Delhi High Court in the case of PCIT-2 Vs. Index Securities Pvt. Ltd. 86
[ITA 735/Ind/2018] [Smt. Sadhna Vohra, Bhopal] Taxmann.com 290. Another objection of the assessee that there should be two satisfaction note one by the assessing officer of the searched party and another by the assessing officer of the assessee. In support of this contention, reliance is made on the judgement of jurisdictional High Court rendered in the case of CIT Vs. Machmen (2015) 60 Taxman.com 484 (MP). Lastly, it is stated that transaction was duly recorded and accounted. It is stated that the capital gain arising out of sale of 3 acres of land to Future Soumya Housing was already offered for tax in the assessment year 2012-13. It is argued that no reliance can be made on the document executed for transfer of land in the year under appeal. It is vehemently argued on behalf of the assessee that the impugned assessment order be quashed being illegal and contrary to the settled law. I find that before the Ld. CIT also the assessee had challenged the validity of the notice issued u/s 153C of the [ITA 735/Ind/2018] [Smt. Sadhna Vohra, Bhopal] Act and the proceedings concluded. The Ld. CIT(A) has decided this issue related to validity of notice u/s 153C of the Act as under:
“Ground No.1 is against issue of notice u/s 153C. It is an undisputed fact that certain documents were seized during the course of search u/s 132 at the premises of M/s. Fortune Soumya Housing, Bhopal. The appellant in her statement recorded u/s 131 on 30.4.2013 had admitted that she had sold three acre land to M/s. Fortune Soumya Housing, Bhopal on 9.8.2011 for Rs.61,00,000/-. Further, no objection to the issue of notice u/s 153C was raised at the time of receipt of the notice. In fact admittedly, the appellant filed return of income in compliance of notice u/s 153C. In the circumstances, the issue of notice is found to be legally valid. The case laws relied upon by the appellant are distinguishable on facts. Therefore, this ground of appeal
is dismissed.”
7. From the above, it is evident that the Ld. CIT(A) did not advert to the submissions of the assessee that the proceedings u/s 153C of the Act cannot be initiated in the present case since the document on the basis of which the proceedings are founded does not pertain to the assessment year under appeal. Ld. CIT(A) dismissed the ground merely on the basis that no objection was raised at the time of receipt of the notice and the income tax return was filed in pursuance of the notice issued u/s 153C of the [ITA 735/Ind/2018] [Smt. Sadhna Vohra, Bhopal] Act. In my considered view, Ld. CIT(A) ought to have decided the issue in accordance with law in vogue. All statutory authorities are duty bound to act in accordance with law. The individual view whims or fancies cannot replace the statutory provisions. The tax payers repose faith in the statutory authorities that his case would be adjudicated in accordance with law.
For the sake of clarity, section 153C of the Act is reproduced as under:
“153C .(1) 96[Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,— (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates 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 issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person 97[for six assessment years immediately preceding the [ITA 735/Ind/2018] [Smt. Sadhna Vohra, Bhopal] assessment year relevant to the previous year in which search is conducted or requisition is made and] for the relevant assessment year or years referred to in sub-section (1) of section 153A : Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed 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 rules98 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 99[and for the relevant assessment year or years as referred to in sub-section (1) of section 153A] 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 furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before 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, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A.”
[ITA 735/Ind/2018] [Smt. Sadhna Vohra, Bhopal] 9. A bare reading of the above provision would make it clear that the assessing officer of the searched party as well as the assessing officer having jurisdiction over the person other than the searched party whose books of accounts or documents or assets, seized or requisitioned have to be satisfied qua the material seized. The Hon'ble jurisdictional High Court in the case of CIT Vs. Mechmen (Supra) has held as under:
“18. The concomitant of this conclusion, is that, the legal position as applicable to Section 158BDregarding satisfaction in the first instance of the first Assessing Officer forwarding the items to theAssessing Officer having jurisdiction; and in the second instance of the Assessing Officer having jurisdiction whilst sending notice to such other person (other than the person referred to in Section 153A), must apply proprio vigore. The fact that incidentally the Assessing Officer is common at both the stages would not extricate him from recording satisfaction at the respective stages. In that, the Assessing Officer is satisfied that the items referred to in Section 153C belongs or belong to a person (other than the person referred to in Section 153A), being sine qua non. He cannot assume jurisdiction to transmit those items to another file which incidentally is pending before him concerning other person (person other than the person referred to in Section 153A). The question as to whether that may influence the opinion of the Assessing Officer having jurisdiction over such other person, also cannot be the basis to take any other view. As a matter of fact, the other Assessing Officer to whom the items are handed over, before issuing notice must himself be satisfied after due verification of the items received and the disclosures made by the other person in the returns for the relevant period already filed by the other person before him. For the same reason, we must reject the argument of the Department that the discretion of the Assessing Officer having jurisdiction will be impaired in any manner, if he were to hold a different view. Similarly, as there is no provision either express or implied (in the Act) to dispense with the requirement of [ITA 735/Ind/2018] [Smt. Sadhna Vohra, Bhopal] satisfaction, if the Assessing Officer happens to be the same, as in this case, the argument of the Department must be negatived.
After receipt of the materials, the Assessing Officer having jurisdiction is expected to conduct enquiry and due verification of the relevant facts; before forming his prima facie satisfaction. The Assessing Officer having jurisdiction will be well within his rights to form an independent view before issuing notice to the other person (person other than the person referred to in Section 153A) under his jurisdiction on the basis of his own enquiry. In our opinion, the view formed by the Assessing Officer after his own enquiry does not entail in seating in appeal over the satisfaction of the first Assessing Officer, who had handed over the items to him.
As a result, we hold that there is no infirmity in the view taken by the Tribunal on the questions under consideration. The view taken by us is reinforced from the decisions of other High Courts in the cases of Commissioner of Income Tax (Central) Vs. Gopi Apartment (supra), Pepsi Foods P. Ltd. (supra), Pepsico India Holdings P. Ltd. (supra) and lastly CIT Vs. Madhi Keshwani (supra). The observations of the Delhi High Court in the case of SSP Aviation Ltd. (supra) have been explained in the subsequent case of Pepsico India Holdings P. Ltd. (supra).”
The revenue has not rebutted the contention of the assessee that there is no valid satisfaction as contemplated u/s 153C of the Act. The revenue has not brought on record the satisfaction recorded by the assessing officer of the searched person as well as the assessing officer of the assessee. Therefore, respectfully following the judgement of the Hon'ble jurisdictional High Court rendered in the case of CIT Vs. Mechmen (supra), I hold that the proceedings u/s 153C of the Act are not [ITA 735/Ind/2018] [Smt. Sadhna Vohra, Bhopal] validly initiated. Now coming to the another objection of the assessee that there is no correlation documentwise with the relevant assessment year. In support of this contention, the assessee has relied upon the judgement of Hon'ble Delhi High Court rendered in the case of Pr. CIT (Central)-2 Vs. Index Securities (P) Ltd. (2017) 86 Taxmann.com 84 (Delhi), wherein the Hon'ble High Court has held as under:
“31. As regards the second jurisdictional requirement viz., that the seized documents must be incriminating and must relate to the Assessment years whose assessments are sought to be reopened, the decision of the Supreme Court in Sinhgad Technical Education Society (supra) settles the issue and holds this to be an essential requirement. The decisions of this Court in RRJ Securities and ARN Infrastructure India Ltd. Vs. Asst. CIT (2017) 394 ITR 569/8 taxmann.com 260 (Delhi) also hold that in order to justify the assumption of jurisdiction under Section 153C of the Act the documents seized must be incriminating and must relate to each of the Assessment years whose assessments are sought to be reopened. Since the satisfaction note forms the basis for initiating the proceedings under Section 153C of the Act, it is futile for Mr. Manchanda to contend that this requirement need not be met for initiation of the proceedings but only during the subsequent assessment.
In the present case, the two seized documents referred to in the Satisfaction Note in the case of each Assessee are the trial balance and balance sheet for a period of five months in 2010. In the first place, they do not relate to the Assessment years for which the assessments were reopened in the case of both assessees. Secondly, they cannot be said to be incriminating. Even for the A.Y to which they related, i.e. AY 2011-12, the A.O. finalised the 13
[ITA 735/Ind/2018] [Smt. Sadhna Vohra, Bhopal] assessment at the returned income qua each Assessee without making any additions on the basis of those documents. Consequently even the second essential requirement for assumption of jurisdiction under Section 153C of the Act was not met in the case of the two Assessees.” 11. In the present case, search was carried out at the third party’s premises where from the document related to sale by the assessee were recovered but the A.O. has made addition in respect of the land purchased by the assessee.
Admittedly, the document related to purchase of land made by the assessee was not recovered. Therefore, the document of sale cannot be related to the year of purchase.
In the light of judgement of the Hon'ble Delhi High Court as relied by the assessee in the case of Pr. CIT (Central)-2 Vs. Index Securities (P) Ltd. (supra), the proceedings u/s 153C of the Act are not in accordance with law.
Another objection of the assess is that the income from capital gain from sale of 3 acres of land to Fortune Soumya Housing was already offered in the income tax return for the assessment year 2012-13, hence, the [ITA 735/Ind/2018] [Smt. Sadhna Vohra, Bhopal] document cannot even be treated as incriminating. This fact is not controverted by the revenue, hence we find force in to the contention of the Ld. Counsel for the assessee.
Thus, this document seized at the premises of the third party cannot be treated as incriminating. Hence, looking to the totality of the facts, I hold that the proceedings initiated u/s 153C of the Act and assessment order passed are not in conformity of law and the same is hereby quashed.
Ground No.1 of the assessee’s appeal is allowed.
Ground No.2 is against sustaining the addition of Rs.4,08,131/- treating the same as unexplained investment. Ld. Counsel for the assessee reiterated the submissions as made in the written submissions. Ld. Counsel for the assessee submitted that cash flow statement as well as balance sheet was submitted before the Ld. CIT(A). In support of this, he drew my attention to paper book page Nos.11 to 13 to buttress the contention
[ITA 735/Ind/2018] [Smt. Sadhna Vohra, Bhopal] that the source of investment is duly explained. He submitted that as per the cash book, the opening balance was Rs.4,36,261/- as on 1.4.2009. The Ld. Counsel for the assessee has also taken me through computation of total income pertaining to the assessment year 2010-11, wherein the assessee has disclosed income from house property, income from business or profession, capital gain and other sources.
Ld. D.R. opposed these submissions and supported the orders of the authorities below.
I have heard the rival contentions. We find from the reply furnished to the A.O. enclosed at paper book pages 16 to 19 that assessee had purchased properties in the years 2002 & 2006 even prior to the purchase of the properties in question at a higher consideration. The A.O. has not disbelieved this investments and source of investment by the assessee. It is also fact that the assessee
[ITA 735/Ind/2018] [Smt. Sadhna Vohra, Bhopal] also purchased properties subsequent to purchase of the agricultural land in question. Therefore, the cash book as submitted by the assessee could not have been disbelieved and it can be inferred from the same that the assessee was having sufficient source of income to make investment.
Hence, the assessee succeeds on this ground as well.
Ground No.3 is general in nature and needs no separate adjudication.
In the result, the appeal filed by the assessee is allowed.
Order was pronounced in the open court on 18.07.2019.