ACIT, NEW DELHI vs. M/S. REALTECH CONSTRUCTION PVT. LTD., NEW DELHI

Finally, he deleted the addition by concluding as under: “10.11 Therefore, looking to the facts and circumstances of this case and also following the case laws relied upon by the appellant, and discussions made in the foregoing paragraphs, it is found that the proceedings under section 153C initiated with reference to the search in the Kalra group, no satisfaction found recorded by the AO of Kalra group and the additions are not related to the documents found during their search but additions have been made on the basis of standalone document found during survey in the case of Mr. Yogesh Gupta, who has serious differences and his statement is not reliable as well as nowhere confirmed regarding additional

Regarding observation of the Ld. CIT(A) addition are not related to the document found during the course of search of Kalra Group and is based on the documents found during the course of survey of Mr. Yogesh Gupta, she submitted that in the satisfaction note filed by the Revenue in the Paper Book on 14.10.2019 ( page 132 & 133), it is mentioned by the AO that the documents seized as per Annexure A- 8 & Annexure A-11 in which working of assets and liabilities of different projects have been given and where a MOU was also seized for partition of the group which could not be corroborated with the books of accounts before the Investigation Wing post search proceedings. Neither the two promoter directors except Sh. Yogesh Gupta eared in response to summon nor were the books of accounts produced before Investigation Wing. Yogesh Gupta in his statement dated 07.12.2011 has confirmed that these documents belong to the assessee company. Hon’ble Delhi High Court in the case of Ganpati Fincap Services (P.) Ltd. v/s CIT [2017] 82 taxmann.com 408 in para 47 to para 50 has held that if after giving sufficient opportunity, the assessee fails to demonstrate how the documents are incriminating or not and no submissions on merits of the case are made, then no fault can be found with the AO for making addition. Further, the survey in the case of Shri Yogesh Gupta was conducted on 15.03.2012 as a result of search and during the course of survey document as Annexure A-35, page 2 (running page 10 of the Paper Book filed by the revenue on 14.10.2019) was found where transaction of cash payment over and above the cheque payment made to Meter & Instruments Pvt. Ltd. for City Emporio, Chandigarh was narrated and this has direct nexus with the seized material where the investment made in the project of City Emporio Chandigarh and the valuation made of this project have been mentioned and on this basis the addition of Rs.13,90,26,749/- of unexplained cash payment has been made by the AO. Further, in the case of Canara Housing Development Company, 274 CTR 122 dated 25.07.2014 Hon’ble Karnataka High Court relying upon the judgment of Hon’ble Delhi High Court in the case of Anil Kumar Bhatia 211 taxman 453 has held that if the search proceedings have already been initiated, any other material can be considered by the AO in that proceedings and no separate proceedings is required to be initiated as in the new scheme of 153A/153C multiple proceedings cannot go together as was under 158BC earlier.

She further submitted that statement of Yogesh Gupta is not reliable, because of differences with other shareholders, mathematical errors and not corroborated by any conclusive evidence of unexplained income. CIT (A) has totally erred in making such statement as Sh. Yogesh Gupta had appeared during the course of proceedings u/s 153C before Income Tax Authorities and even in the return of income filed u/s 153C, address of Sh. Yogesh Gupta was given and all the notices were given to him for this proceeding and there was no objection on behalf of any other shareholder or director. Rather the other two shareholders never appeared before Investigation Wing even in response to summons or during the assessment proceedings except Sh. Yogesh Gupta. Further, there is no mathematical error in the sheet and addition was made only in respect of the cash payment over and above the cheque payment made to Meter & Instruments Pvt. Ltd. on the basis of the impounded documents found during the course of survey from the possession of the director Sh. Yogesh Gupta. Reliance was placed by her on the case of Hon’ble Delhi High Court of Sonal Construction 359 ITR 532 where Hon’ble Court has held in para 17 held that the corroboration sought by the Tribunal in support of the seized documents, it is not an inviolable rule applicable to all situations and to all cases that every seized document should be corroborated before any addition can be made based on it. If calculations and computations have been made in the seized documents in such a manner that its probative value and genuineness cannot be doubted, nothing prevents the Assessing Officer from making additions on the basis of such documents despite the absence of any corroboration.

No addition was made in the hands of Mr. Yogesh Gupta and Mr. Ajit or in the case of Meters & Instruments Pvt. Ltd. When the business is conducted by the appellant company and Sh. Yogesh Gupta is the director who admitted that this transaction relates to the appellant company and the impounded document also suggests that pertains to the assessee company as on the top of it name of the assessee company was mentioned, then no addition can be made in the hands of other persons who dealt with the cash on behalf of the company. Further, Meters & Instruments Pvt. Ltd. is a company with whom the assessee company has entered into a Property Development agreement who was the owner of the industrial plot of land for developing, constructing and building the commercial complex. Hence, as the cash was given by the appellant company, the addition has to be made in the hands of the appellant company as unexplained.

The additional income was disclosed by the appellant in the earlier assessment year. The submission of the appellant and the observation of CIT (A) is erroneous as it is an admitted fact that during the course of survey operation conducted in the case of the appellant company incriminating documents were impounded which contains details of booking made and payment received for the project City Emporio at Chandigarh outside the books of accounts and only Rs. 1,21,41,199/- was surrendered as additional income by the appellant company during A.Y. 2008-09. (Copy of assessment order u/s 143(3), dated 30.12.2010 is enclosed from page 51 to 55). Further this document clearly mentions the date as 31.03.2011 and the cash payment was made by the assessee company to Meter & Instruments Pvt. Ltd. for construction of commercial complex. Hence, no set off can be given of this surrender income against the addition of Rs. 13,90,26,749/- made in A.Y. 2011-12. She also pointed out that Hon’ble ITAT, Delhi Bench has already considered this fact in A.Y. 2008-09 in order dated 16.10.2017 and held in para 9 that the assessee is carrying on two projects and during the course of survey and search proceedings it was found that in both the projects assessee is collecting “on money” towards the sale of space.

On the arguments advanced by the Ld. Counsel during the course of hearing on 14.10.2019 that 153C proceedings can only be initiated if the documents seized are incriminating in nature and reliance placed upon the decision of RRJ Securities of Hon’ble Delhi High Court; in the case of Green Range Farms Pvt. Ltd. of Hon’ble ITAT Delhi Bench and the case of Dream City Buildwell of Hon’ble Delhi High Court, she submitted that this issue first of all does not arise from the order of CIT(A) and no cross objection has been filed by the assessee, hence no fresh legal ground can be taken by the assessee at this stage. Without prejudice, she submitted that this issue is covered by the decision of Hon’ble Delhi High Court in the case of SSP Aviation 346 ITR 177 where Hon’ble Delhi High Court after detailed discussion made regarding the provision of Section 153C has held various ratios in para 14, 15, 17 & 18 which are as under: “Now there can be a situation when during the search conducted on one person under section 132, some documents or valuable assets or books of account belonging to some other person, in whose case the search is not conducted, may be found. In such case, the Assessing Officer has to first be satisfied under section 153C, which provides for the assessment of income of any other person, i.e., any other person who is not covered by the search, that the books of account or other valuable article or document belongs to the other person (person other than the one searched). He shall hand over the valuable article or books of account or document to the Assessing Officer having jurisdiction over the other person. Thereafter, the Assessing Officer having jurisdiction over the other person has to proceed against him and issue notice to that person in order to assess or reassess the income of such other person in the manner contemplated by the provisions of section 153A. Now a question may arise as to the applicability of the second proviso to section 153A in the case of the other person, in order to examine the question of pending proceedings which have to abate. In the case of the searched person, the date with reference to which the proceedings for assessment or reassessment of any assessment year within the period of the six assessment years shall abater is the date of initiation of the search under section 132 or the requisition under section 132A. For instance, in the present case, with reference to the 'P' Group of Companies such date will be 5.1.2009. However, in the case of the other person, which in the present case is the assessee herein, such date will be the date of receiving the books of account or documents or assets seized or requisition by the Assessing Officer having jurisdiction over such other person. In the case of the other person, the question of pendency and abatement of the proceedings of assessment or reassessment of the six assessment years will be examined with reference to such date. [Para 14] It needs to be appreciated that the satisfaction that is required to be reached by the Assessing Officer having jurisdiction over the searched person is that the valuable article or books of account or documents seized during the search belong to a person other than the searched person. There is no requirement in section 153C(1) that the Assessing Officer should also be satisfied that such valuable articles or books of account or documents belonging to the other person must conclusively reflect or disclose any undisclosed income. [Para 15] It will be appreciated from the above that the procedure envisaged by section 153C, which is applicable to re assessee herein, does not in any way infringe any rights of the assessee or curtail or curb his right to be heard by the Assessing Officer or to file appeals and question the assessments made pursuant to the notice under section 153A. There is no ground for any apprehension that the assessee will not be heard before the assessments or reassessments for the six assessment years are completed. In fact, in the case of the assess-i itself the Assessing Officer has not made any addition in the assessments completed under section 153A read with section 153C for the assessment years 2003-04 to 2006-07 and 2008-09. He has made the addition of Rs. 86 crores only in the assessment year 2007-08 against which an appeal has already been filed. Thus, full

Further in the case of Ganpati Fincap (supra), Hon’ble Delhi has considered the case of RRJ Securities in para 37 and mentioned that in that case the seized hard disk did not belong to the company and on this account, relief was given. Further in the case of Index Securities Pvt. Ltd. 86 taxmann.com 84 also, relief was given to the assessee as trial balance and balance sheet seized from other person did not belong to assessee or relate to relevant assessment years. Hence, in the case of Green Range Farms Hon’ble Tribunal has not considered the judgment of Hon’ble Delhi High Court of SSP Aviation at all and not considered judgment of RRJ Securities and Index Securities properly. Similarly, in the case of Dream City Buildwell, Hon’ble High Court has held that the documents did not belong to the assessee and the document in the form of license given by director town & country planning has no relevance for determining escapement of income whereas in the instant case of the appellant the seized documents of Annexure A-7 & Annexure A-11 clearly related to the commercial project City Emporio Mall, Chandigarh and subsequently the incriminating impounded documents of Annexure A-35 (page 10 of the Paper Book filed on 14.10.2019) has direct nexus on determination of the income of the" appellant company and cannot be ignored and brushed aside by the appellate authorities.

On the other hand, ld. counsel for the assessee, Mr. Salil Aggarwal submitted that here in this case proceedings have been initiated u/s.153C based on documents seized from search operation carried out on M/s. Consortium Group of cases on 28.07.2011; and based on these documents, ‘satisfaction’ has been recorded u/s.153C to initiate the proceedings u/s.153C/143A. However, neither the document was incriminating in nature nor any addition has been made by the AO based on such seized documents. The basis for addition in this case is based on survey material which cannot be used in the proceedings u/s.153C. For acquiring jurisdiction u/s.153C, the seized documents must be incriminating and relate to the assessee and to each of the Assessment Year seized for which assessment was sought to be reopened. Here the seized documents referred to Assessing Officer’s satisfaction note, first of all, are merely certain MOUs between the promoters of Realtech Group which has no correlation with any income or undisclosed income. Therefore, in view of the settled judicial principle by the Hon’ble Jurisdictional High court in the case of RRJ Securitites, 394 ITR 569 (Del.). PCIT vs. Index Securities Pvt. Ltd., reported in (2017) 86 Taxmann.com 84, such seized documents which are not incriminating cannot lead to acquisition of jurisdiction u/s.153C and therefore, addition made on the basis of survey documents cannot be the foundation for making assessment u/s.153C. He further drew our attention to the relevant finding of the Ld. CIT (A) as we have discussed above.

We have heard the rival submissions and also perused the relevant finding given in the impugned orders as well as material placed on record. On the facts as discussed above, it is clear that the satisfaction note u/s.153C was based on certain seized documents found during the course of search and seizure action initiated in Kalra Group cases/Consortium Securities Pvt. Ltd. The satisfaction note of the Assessing Officer for acquiring jurisdiction u/s 153C reads as under: “A search & seizure action in Kalra group of cases was initiated on 28.07.2011. Main company of the group is Consortium Securities Private Ltd. and it is a stock brokering company having membership of National Stock Exchange (NSE), Bombay Stock Exchange (BSE), MCX Exchange Ltd. (MCX-SX), United Stock Exchange Ltd.(USE) and depository participant of National Securities depositories Limited (NSDL). The main persons controlling the group are Sh. Paraminder Singh A his sons Sh. Harveer Singh and Sh. Bikramjit Singh Kalra. Consortium group of companies are promoted by Sh. Paraminder Singh Kalra and the registered office of the group companies are in New Delhi. Sh. Paraminder Singh Kalra is the main person who is controlling the affairs of the group companies and his sons namely Sh. Harveer Singh Kalra and Sh. Bikramjit Singh Kalra are also assisted him in controlling the affairs of the group

From a bare perusal of the ‘satisfaction’ note, it can be seen that the seized documents are mainly MOUs between promoters of Realtech group, namely, Shri Yogesh Gupta, Shri Pankaj Dayal and Shri Rajeev Behl along with the some working of the Realtech Group. There is no reference in the assessment order or in the seized documents that these are in the nature of incriminating documents from where inference can be drawn that there is any undisclosed income or any other income which has escaped assessment. Apart from that, it is further noticed that the basis and the foundation of the Assessing Officer for making the addition is the document found during the course of survey operation carried out on the premises of Shri Yogesh Gupta, who was earlier Director of the assessee-company, carried out by the Investigation Wing on 15.03.2012. During the course of such survey, a document was retrieved from computer, which was in the form of computer printout, which contained details of payment to be received by M/s. Meter & Instrument Pvt. Ltd. from M/s. Realtech Constructions Pvt. Ltd. Further, Assessing Officer has inferred that as per the details, Shri Yogesh Gupta has paid cash of amount of Rs.3,25,00,000/- with respect to sale of Delhi Shop and Mr. Ajeet for Rs.10,65,749/- with respect to sale of Chandigarh shop. As observed by the Ld. CIT (A), the addition has been made on the basis of document found during the course of survey which has no reference to the proceedings u/s.153C, because 153C has been initiated on the basis of document seized during the course of search carried out on 28.07.2011 in the case of Kalra Group.

As regards the second jurisdictional requirement viz., that the seized documents must be incriminating must relate to the AYs 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. v. Asstt. CEL [2017] 394 HR 569/81 taxmann.com 260 (Delhi) also hold that in order to justify the assumption of jurisdiction under Section 153 C of the Act the documents seized must be incriminating and must relate to each of the AYs whose assessments are sought to be reopened. Since the satisfaction note forms the basis for initiating the proceedings under Section 153 C 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 ease 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 AYs for which the assessments were reopened in the case of both assessees. Secondly, they cannot be said to be incriminating. Even for the AY to which they related, i.e. AY 2011-12, the AO finalised the assessment at the returned income for each Assessee without making any additions on the basis of those documents. Consequently even the second essential requirement for assumption of jurisdiction under Section 153 C of the Act was not met in the ease of the two Assessees.”

It can straightaway be noticed that the crucial change is the substitution of the words ‘books of account or documents, seized or requisitioned belongs to or belong to a person other than the person referred to in s. 153A’ by two clauses i.e., (a) and (b), where cl. (b) is in the alternative and provides that ‘such books of account or documents,‘ seized or requisitioned’ could ‘pertain’ to or contain information that ‘relates to’ a person other than a person referred to in s. 153A of the Act.

The trigger for the above change was a series of decisions under s. 153C, as it stood prior to the amendment, which categorically held that unless the documents or material seized ‘belonged’ to the assessee, the assumption of jurisdiction under s. 153C of the Act qua such assessee would be impermissible. The legal position in this regard was explained in Pepsi Foods (P) Ltd. us. Asstt. CIT (2014) 270 CTR (Del) 459: (2014) 108 DTR (Del) 297 : (2014) 367 ITR 112 (Del) where in para 6 it was held as under : “6. On a plain reading of s. 153C, it is evident that the AO of the searched person must be ‘satisfied’ that inter alia any document seized or requisitioned ‘belongs to’ a person other than the searched person. It is only then that the AO of the searched person can hand over such document to the AO having jurisdiction over such other person (other than the searched person). Furthermore, it is only after such handing over that the AO of such other person can issue a notice to that person and assess or reassess his income in accordance with the provisions of s. 153A. Therefore, before a notice under s. 153C can be issued two steps have to be taken. The first step is that the AO of the person who is searched must arrive at a clear satisfaction that a document seized from him does not belong to him but to some other person. The second step is- after such satisfaction is arrived at that the document is handed over to the AO of the person to whom the said document ‘belongs’. In the present cases it has been urged on behalf of the petitioner that the first step itself has not been fulfilled. For this purpose it would be necessary to examine the provisions of presumptions as indicated above. Sec. 132(4A)(i) clearly stipulates that when inter alia any document is found in the possession or control of any person in the course of a search it may be presumed that such document belongs to such person. It is similarly provided in s. 292C (1)(i). In other words, whenever a document is found from a person who is being searched the normal presumption is that the said document belongs to that person. It is for the AO to rebut that presumption and come to a conclusion or ‘satisfaction' that the document in fact belongs to somebody else. There must be some cogent material available with the AO before he/she arrives at the satisfaction that the seized document does not belong to the searched person but to somebody else. Surmise and conjecture cannot take the place of ‘satisfaction’.

Further, the Hon’ble High Court held that the onus was on the Revenue to show that incriminating material/ document recovered at the time of search belongs to the assessee and it is not enough for the Revenue to show that documents pertained to the assessee or contains information that relates to the assessee.

Coming to the arguments relied upon by the Ld. CIT-DR in so far as contention that the Ld. CIT (A) has erroneosly held that satisfaction should be recorded by the Assessing Officer and the Kalra Group and not that of the assessee is accepted in view of the judgment of Hon’ble Delhi High Court in the case of PCIT vs. Sheetal International Pvt. Ltd. (supra) and Ganpati Finserve Ltd. (supra). However, the other arguments raised by the ld. CIT-DR in view of the categorical judgments of Hon’ble Delhi High Court in the case of RRJ Securities Ltd. (supra), PCIT vs. Dream City Buildwell cannot be accepted.

Further, the objection raised by the Ld. CIT-DR that ld. counsel for the assessee cannot raise this issue without filing the Cross Objection cannot be accepted, because the assessee can very well challenged the scope of the addition on legal grounds, when here in this case Ld. CIT(A) has given a categorical finding that technically in this case proceedings u/s.153C could not have been initiated because the satisfaction and the proceedings are not based on any seized documents albeit on the documents found during the course of survey.

Apart from that, it is seen that the Ld. CIT (A) has noted that the assessee has disclosed a sum of Rs.24.50 crores as additional income during survey owing to such real estate business of the assessee, and therefore, if at all there is any element of cash payment or cash income and the source of income of the business is the same and no further evidence has been found or investigated during the assessment proceedings, then no addition can be made again in this Assessment Year.

Thus, the entire addition is held to be beyond the scope of Section 153C and the same is deleted. Accordingly, the order of the Ld. CIT (A) is upheld and appeal of the Revenue is dismissed.

In the result, the appeal of the Revenue is dismissed.