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Income Tax Appellate Tribunal, IN THE INCOME TAX APPELLATE TRIBUNAL
Before: SHRI BEFORE SHRI BHAVNESH SAINI, & BEFORE SHRI BHAVNESH SAINI, & BHAVNESH SAINI, & BHAVNESH SAINI, & SHRI SHRI R.K. PANDASHRI SHRI R.K. PANDAR.K. PANDAR.K. PANDA
PER R.K. PANDA, AM This appeal filed by the Revenue is directed against the order dated 01/12/2014 of the Ld. CIT(A)-31, New Delhi, relating to assessment year 2009-10.
The grounds raised by the Revenue are as under:-
i. The order of the CIT(A) is not correct in law and facts. ii. On the facts and circumstances of the case the Ld. CIT(A) has erred in law in treating the assessment order in valid by holding defect in assumption of jurisdiction u/s 153C by following the decision of jurisdictional High Court of Delhi in the case of Pepsi Foods Pvt. Ltd. iii. On the facts and circumstances in the case the Ld. CIT(A) has erred in law in not deciding the issue on merits of the case.
The facts of the case, in brief, are that a search and seizure operation under section 132 of the Income Tax Act, 1961 (hereinafter ‘the Act’) was conducted on K.S. Dhingra & G.S. Dhingra and others group of cases on 16/09/2011. During the course of said search & seizure operation, certain documents/papers belonging to the assessee i.e. M/s Advantage Housing Pvt. Ltd. were found and seized. The Assessing Officer issued notice under 153C of the Act on 08/10/2013.
During the course of assessment proceedings, the Assessing Officer noted that the assessee has purchased a property at 58, Sunder Nagar, New Delhi from M/s Atma Ram Properties (P.) Ltd. on 25/08/2008 at the cost of Rs.33 Crores. However, during the course of search a writing pad was also seized from the table of Sh. Naveen Chaudhary, CFO M/s U.K.
Paints India Pvt. Ltd. The value of the property recorded as Rs.36.5 crores. Rejecting the arguments advanced by the assessee, the Assessing Officer made addition of Rs.3.5 Crores to the total income of the assessee by recording as under:-
“The assessee has contended that the said seized document was not found from the premises of the company. In this regard it is pertinent to note that M/s U.K. Paints (India) Pvt. Ltd. is a shareholder in the company. Further, the CFO of M/s U.K. Paints (India) Pvt. Ltd. Sh. Naveen Chaudhary is the authorized signatory of the assessee company and the property has been purchased through him. The note pad has been found from his table. Hence, if a document has been found from the possession of the authorized signatory of the company in whose name the said property has been purchased, it cannot be said that the document is not relevant. The other noteworthy point is that the document contains details regarding a number of transactions pertaining to the property at 58, Sunder Nagar, New Delhi such as payment of stamp duty etc. These transactions are duly reflected in the books of a/c. Only the transaction relating to cash payment of Rs. 3.5 crores is not reflected in the books of a/c. When a transaction is a part of a series of transactions and the other transactions are reflected in the books, then with regard to the unaccounted transaction it cannot be accepted that the transaction never happened. Hence, the contention of the assessee that the said payment in cash was not made is not acceptable.” 4. Before the CIT(A), it was argued that noting found at the page 3 of the Annexure A-15, which is the basis of addition were neither written by the assessee nor by its employees. The contents of the said page are not based on facts. It was argued that the purchase consideration of Sunder Nagar property was only Rs.33 Crores and not Rs.36.51 Crores and there is no evidence on record that assessee has paid cash of Rs.3.5 Crores as alleged by the Revenue. It was further argued that there are certain factual inconsistency in the said note since at one place total consideration is mentioned Rs.36.51 Crores where the payment worked out only Rs.36 Crores.
It was argued that in order to invoke the provisions of section 153C of the Act, the Assessing Officer of the searched person must be “satisfied” that any document seized should belong to “a person other than the person who has been searched”. Only after such satisfaction is arrived at the documents should be handed over to the Assessing Officer having jurisdiction over such other person. In the instant case, the Assessing Officer has recorded his satisfaction only on the basis of two annexures i.e. Annexure A-23 pages 34 to 54 and Annexure AA-4 Pages 62 to 77. The Assessing Officer has not taken into consideration the notepad as alleged to have been found from the table of Mr. Naveen Chaudhary, CFO of UK Paints and marked as Annexure A-15, therefore, the assumption of jurisdiction is contrary to law. It was further argued that the so called seized documents are the photocopies of sale deed dated 25/08/2008 executed between M/s Atma Ram Properties and the assessee. The original copy of the sale deed is still available with the assessee. Similarly, various other pages are the photocopies of the possession letter and indemnity bond executed by the vendors in favour of the assessee and the originals are still available with the assessee.
Referring to the decision of the Hon’ble Delhi High Court in the case of Pepsico India Holdings Pvt. Ltd. in Writ Petition (C)No.414/2014, it was argued that the Hon’ble High Court under similar circumstances, where photocopies were recovered and seized during the course of search has held that the proceedings initiated by the Assessing Officer under section 153C of the Act are not in accordance with law. Referring to the decision of the Hon’ble Delhi High Court in the case of M/s Pepsi Foods Pvt. Ltd. vs ACIT in Writ Petition (C) No.415/2014 & CM 823/2014, it was argued that Hon’ble High Court in the said decision has held that where the satisfaction note of the Assessing Officer does not throw any light on how he has come to the conclusion that the document mentioned in the satisfaction note belong to the party searched and belong to the assessee, therefore, the mere use of the word ‘satisfied’ was held to be not sufficient to meet the requirement of Law. It was accordingly argued that the assumption of jurisdiction by the Assessing Officer under section 153C of the Act is not in accordance with law and should be quashed.
Based on the arguments advanced by the assessee, the Ld. CIT(A) quashed the 153 proceedings by observing as under:-
“4.3.17. I have considered the submission of the AR and the assessment order. In the present case, the AO has recorded a satisfaction note before issuing notice u/s 153C. The said satisfaction note is reproduced below for ready reference:
A search was conducted on Shri. K.S. Dhingra and Shri G.S. Dhingra on 16.09.2011. The search action was conducted u/s 132 of' the IT Act 1961. During the course of such proceedings documents belonging M/s Advantage Housing Pvt. Ltd. were found and seized at the premises of chamber of Shri. Kuldeep Singh Dhingra and Shri G.S. Dhingra 19, DDA Commercial Complex, Zamrudpur, Kailash Colony Extention, Greater Kailash Part-1, New Delhi including 1st Floor of this building. The documents are described below:-
Page No. 34-54, Annexure A-23, party KGO :- These pages show the sale deed and other documents like indemnity bond, possession letter etc. regarding sale of property at 58, Sunder Nagar, New Delhi by M/s Atma Ram Properties Pvt. Ltd. to M/s Advantage Housing Pvt. Ltd. for a consideration of Rs. 33.00 crores on 28.08.208 Page No. 62-77, Annexure AA-4, party KGO:- These pages show the agreement to sell made at New Delhi on 10.07.2008 between Atma Ram Properties Pvt. Ltd., the vendor on the one part and M/s Advantage Housing Pvt. Ltd., as vendee on the other part. The vendor have agreed to transfer assign in favour of the vendee the property no. 58, Block 171, Sunder Nagar, New Delhi for consideration of Rs. 33.00 crores. “Thus, documents belonging to M/s Advantage Housing Pvt. Ltd. have been found and seized during the course of search u/s 132 of the Income-tax Act, 1961 on Sh. K.S. Dhingra and Sh. G.S. Dhingra. Hence, I am satisfied that in accordance with the provisions of section 153C of the Income tax Act, 1961 proceedings to assess/reassess the income of the assessee for assessment year 2006-07 to assessment year 2011-12 have to be initiated. ”
Since I am also the Assessing Officer for Advantage Housing Pvt. Ltd. notice u/s 153C r.w.s. 153A is hereby issued for the assessment year 2006-07 to 2011-12.
4.3.18. From the above it is clear that the Assessing Officer has only referred to pages 34 to 54 of Annexure A-23 and pages 62 to 67 of Annexure AA-4. He has, for some unknown reasons, not mentioned page 3 of Annexure A-15 which contain the incriminating facts against the assessee and on the basis of which the addition has been made.
4.3.19. The documents which are mentioned in the satisfaction note are photocopies of the sale deed and agreement to sell alongwith Indemnity Bond, possession letter etc. in respect of the Sunder Nagar property purchased by the appellant from M/s Atma Ram Properties (P) Ltd. These documents however, do not give any indication that the appellant had paid Rs. 3.5 crores in cash over and above Rs. 33 crores as recorded in the sale deed. Further these are the photocopies and not the original deeds or original documents. 4.3.20. Pages 34 to 48 of Annexure A-23, are the photocopies of the sale deed dated 25.8.2008 for purchase of property by the appellant from M/s Atma Ram Properties (P) Ltd. The AR has stated that the original copy of the sale deed was very much available with the appellant. Further pages 49 to 53 of the same Annexure are once again photocopies of possession letter and Indemnity Bond executed by M/s Atma Ram properties (P) Ltd. in favour of the appellant. The AR has submitted that the original of those documents were still available with the appellant. As regards pages 62 to 67 of Annexure AA-4, the same are once again photocopies of the agreement to sell dated 10.07.2008 for the same property and they are not original documents. The AR has submitted that original of these documents were still available with the appellant.
4.3.21. In the above background, it is noted that the satisfaction noted by the A.O. describes photocopies of the documents which do contain name of the appellant as purchaser 6f the property concern. These are not the originals of the documents and only photocopies. The AO has stated in the satisfaction note that during the course of search at the premises of Sh. K.S.Dhingra & Sh. G.S.Dhingra, the above said documents belonging to the appellant were found and seized and that he was satisfied that in accordance with the provisions of section 153C of the Act, proceedings to assess/re-assess the income of the assessee for A.Y. 2006-07 to A.Y. 11-12 have to be initiated. However, there is no reason or justification given in the note as to why he was coming to the conclusion that the documents belonged to the appellant.
4.3.22. I have considered the satisfaction note of the AO. It suffers from defects due to the law as pronounced by the Hon’ble High Court of Delhi. In the case of Pepsi Food (P) Ltd. (Supra), the Hon’ble High Court of Delhi has held that mere use or mention of the word “satisfaction” or the word “I am satisfied” in the satisfaction note would not meet the requirement of the concept of satisfaction as used in section 153C of the Act. It has been held that the satisfaction note itself must display the reasons or the basis for the conclusion-that the A.O. of the searched person was satisfied that the seized documents belonged to a person other than the searched person. It has been held in the same case that the A.O. of the searched person must first arrive at a clear satisfaction that a particular documents seized did not belong to the person from whom it has been seized. Thereafter, he should form a satisfaction that the seized document belongs to such and such other person. U/s 132(4A)(i), there is a presumption that the documents seized from a person belonged to such person. There is also presumption u/s 292C(l)(i) that a document which is found from a person who was searched, would be belonging to that person. The Hon’ble High Court has held that the A.O. must at the first instance rebut such a presumption provided in the Act itself and only thereafter he should come to the conclusion or satisfaction that the seized document belonged to someone else. There must be some cogent material available with the A.O. before he arrives at a satisfaction that the seized document did not belong to the searched person but to somebody else and that surmises and conjectures can not take the place of satisfaction.
4.3.23. In the subsequent case of M/s Pepsi Foods India (P) Ltd. Vs ACIT (supra) the Hon’ble jurisdictional of High Court of Delhi has further held that finding photocopies in the possession of a searched person would not necessarily mean that they belonged to a person who holds the originals. The possession of documents and possession of photocopies of documents were two separate things. Further, it has also been observed that one 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 but obviously “relates to” or “refers to” a vendor.
4.3.24. On considering the ratio of the two cases namely M/s Pepsi Food (P) Ltd.(supra), and M/s Pepsico India Holding Pvt. Ltd. (supra), it is seen that the assumption of jurisdiction by the A.O. u/s. 153C of the Act is bad in law. In the satisfaction, he has merely stated that documents belong to the appellant were found and seized. He has not expressed any reasons in arriving at such a conclusion. He does not say as to how he has felt that the photocopies of the sale deed etc. did not belong to the party who was searched and that the same belonged to the appellant. The Hon’ble High Court of Delhi has held that the said satisfaction should be very much emanating from the note made before issuing notice u/s 153C. The relevant para 11 & 12 of the order of Hon’ble High Court of Delhi in the case of Pepsi Foods Pvt Ltd vs ACIT (Supra) is reproduced below for ready reference:
“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 kind required under section 153C of the said Act.
12. This being the position the very first step prior to the issuance of a notice wider Section 153C of the said Act has not been fulfilled. Inasmuch as this condition precedent has not been met, the noticed under Section 153C are liable to be quashed. It is ordered accordingly. The writ petition are allowed as above. There shall be no order as to costs. ” 4.3.25 Since such satisfaction is not coming out of the note recorded by the A.O. before issuing notice u/s 153C, the action of the A.O. is bad in law as per the above decisions of the High Court. Therefore, respectfully following the said ratio of the Hon’ble High Court Delhi in the case of M/s Pepsi Foods (P) Ltd. (supra), I hereby hold that the assumption of jurisdiction u/s 153C by the A.O. was bad in law in as such as he has not stated the reasons for holding that the documents mentioned in the satisfaction note belonged to the appellant.
4.3.26 Since the order of the A.O. is being held invalid due to the defect in assumption of jurisdiction by following the decisions of jurisdictional High Court of Delhi, other grounds raised in the appeal do not survive.”
Aggrieved by such order, the Revenue is in appeal before the Tribunal.
The Ld. DR strongly challenged the order of the Ld. CIT(A). He submitted that the order passed by the Ld. CIT(A) is not in accordance with law especially when the documents belonging to the assessee were found from the premises of the searched person, the Assessing Officer has recorded his satisfaction who incidentally is the Assessing Officer of both the searched party as well as the assessee. He also relied upon the following decisions:-
i. PCIT vs Super Malls Pvt. Ltd. [2016] 76 taxmann.com 267 (Del)
393 ITR 557 (Del) ii. Ganpati Fincap Services (P.) Ltd. vs CIT [2017] 82 taxmann.com
408(Del.) iii. Rajesh Sunderdas Vaswani vs ACIT [2016] 76 taxmann.com 311
(Guj.) iv. CIT vs Classic Enterprises (35 taxmann.com 244), 358 ITR 465.
The Ld. Counsel for the assessee on the other hand strongly supported the order of the CIT(A). He submitted that in this case no satisfaction note was recorded in the case of the searched person but it was recorded only in the case of assessee. The so called documents which are seized from the searched party are nothing but photocopies of the sale deed and agreement to sale and possession letter, etc and the original documents are still available with the assessee. He submitted that before issuing notice under section 153C of the Act, it is a condition precedent that the satisfaction note should also be recorded in the case of the searched person, even though the Assessing Officer of the searched person and the other person is the same. Since, in instant case, no such satisfaction has been recorded in the case of the searched party, therefore, the assumption of jurisdiction by the Assessing Officer under section 153C in the case of the assessee is bad in law.
We have considered the rival arguments made by both the sides, perused the orders of the authorities below and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer on the basis of certain documents found and seized from the premises of Shri K.S. Dhingra & G.
S. Dhingra and other group of cases during the course of search and seizure operation on 16/09/2011 issued noticed under section 153C of the Act to the assessee after recording his satisfaction note in the case of the assessee that the said sized documents were belonging to the assessee. We find the Ld. CIT(A) quashed the proceedings initiated under section 153C of the Act, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the Ld. Counsel for the assessee that the documents so seized from the premises of Shri K.S. Dhingra & G. S. Dhingra during the course of search under section 132 of the Act on 16/09/2011 are nothing but Xerox copy of the sale deed, agreement to sale and possession letter, etc and the original documents are still available with the assessee. It is also his submissions that no satisfaction note has been recorded in the case of the searched person that these documents do not belong to the searched person but belong to some other person i.e. the assessee in the instant case.
We find that the Ld. CIT(A) while adjudicating the issue has gone through the documents which are mentioned in the satisfaction note and found that the documents so found or seized are photocopy of the sale deed, agreement of sale along with indemnity bond, possession letter, etc in respect of Sunder Nagar Property purchased by the assessee from M/s Atma Ram Properties Ltd. These documents do not give any indication that the assessee had paid Rs.3.5 Crores in cash over and above of Rs.33 Crores as recorded in the sale deed. We find the Ld. CIT(A) while adjudicating the issue has followed the decision of the Hon’ble Delhi High Court in the case of Pepsico India Holding Pvt. Ltd. (supra) and M/s Pepsi Foods Pvt. Ltd. (supra). The Ld. DR could not controvert the factual findings given by the Ld. CIT(A) in his order on this issue. We further find that there is no satisfaction note recorded in the case of the searched person which is a condition precedent for issue of notice under section 153C of the Act although the Assessing Officer of the searched person and the other person is the same. In view of the above discussion and detailed reasoning given by the Ld. CIT(A) on this issue, we find no infirmity in his order in quashing the proceedings initiated under section 153C of the Act by the Assessing Officer. The various decisions relied upon by the Ld. DR are distinguishable and are not applicable to the facts of the present case especially when the documents seized are only photocopies, the originals of which are already in the possession of the assessee and the Assessing Officer has not recorded his satisfaction in the case of the searched person that the documents so found and seized from the premises of the searched person do not belong to the searched person but belong to some other person. The grounds raised by the Revenue are accordingly dismissed.
In the result, appeal of the Revenue is dismissed.
Decision pronounced in the open Court on 27/02/2020.