M/S. SIR SHADILAL ENTERPRISES LTD.,NEW DELHI vs. DCIT, NEW DELHI

Per Dr. B. R. R. Kumar, Accountant Member:

The present appeals have been filed by the assessee against the orders of the ld. CIT(A)-XI, New Delhi dated 21.08.2014.

ITA Nos. 5727 & 5728/Del/2014 2 Sir Shadilal Enterprises Ltd. called the AO for short) in reviving the assessment proceedings u/s 143(3) of the Income Tax Act, 1961 (Act for short) for A.Y. 2004-05 with reference to the provisions of second proviso of sub section (1) of section 153C of the Act. The impugned assessment proceedings became barred by limitation as on 31.12.2006 and the assessment order dated 29.11.2013, therefore, requires to be quashed.

1.2 That on the facts and in the circumstances of the case, the learned CIT(A) has erred in law in holding that the extant law on 16.05.2013 (the date on which the AO started the reassessment proceedings) is applicable and in rejecting the appellant's submission that the law prevailing on 31.12.2006 was applicable as far as limitation period for assessment year 2004-05 is concerned.

2.1 That on the facts and in the circumstances of the case, the learned CIT(A) erred in upholding an addition of Rs. 3,33,13,300/- made by the AO under section 69C of the Act on account of alleged unaccounted contributions made by the appellant to Uttar Pradesh Distillers Association (UPDA) in Financial Year 2003-04 solely on the basis of the statement of Shri R.K. Miglani recorded on 14.02.2006 at the back of the appellant and without allowing an opportunity to the appellant to cross examine Shri R.K. Miglani although a specific request in this regard was made by the appellant and without appreciating that Miglani had filed an Affidavit dated 03.03.2008 unequivocally denying the statement given by him on 14.02.2006 during the course of search proceedings.

2.2 That on the facts and in the circumstances of the case, the learned CIT(A) erred in upholding the addition of Rs. 3,33,13,300/- made by the AO u/s 69C of the Act without appreciating that in the hands of UPDA, the alleged contribution has been taxed u/s68 of the Act.

2.3 That on the facts and in the circumstances of the case, the learned CIT(A) erred in confirmity the

ITA Nos. 5727 & 5728/Del/2014 3 Sir Shadilal Enterprises Ltd. addition of Rs.3,33,13,300/- made by the AO on the basis of surmises & conjecture.

ITA Nos. 5727 & 5728/Del/2014 4 Sir Shadilal Enterprises Ltd. argued that the provisions of Section 153A(2) of the Act were introduced by Finance Act, 2008. Hence, the assessment of the assessee is barred by limitation. Further, the ld. AR relied on the arguments taken before the ld. CIT(A) which are as under: “Ground of Appeal No. 1 is directed against the legality of the impugned assessment order on the ground that it is barred by limitation and, therefore, requires to be quashed. The appellant had sought my advice in this matter and a copy of my written opinion dated 07.06.2013 was filed before the learned Deputy Commissioner of Income Tax Circle 8(1). New Delhi (hereinafter called AO for short) and has also been filed in the statement of facts annexed to Form No. 35. It is submitted that the reassessment proceedings for Assessment Year 2004-05 stood time barred by limitation on 31.12.2006 because as on 31.12.2006 the provisions of Section 153A(2) of the Income Tax Act, 1961 (Act for short) were not in the statute of books. The provisions of Section 153A(2) of the Act were introduced only by Finance Act, 2008 w.e.f. 01.06.2003. It is submitted that it is trite law that the legislature does not intend to attribute to the amended provisions a greater retrospectivity than expressly mentioned nor does it authorize the Assessing Officer to commence proceedings which before the new law came into force had become time barred. If any authority is needed for this elementary proposition of law, reference can be made to the decision of Hon'ble Supreme Court of India in the case of S.S. Gadgil V. Lal & Co.53 ITR 231. To the same effect are the decisions of Hon’ble Allahabad High Court in Controller of Estate Duty V. Zafrul Hasan 146 ITR 220, CIT V Hari Raj Swarup & Sons 138 ITR 462, the decision of Hon’ble Kerala High Court in the case of Varkey Jacob and Co. V. CIT 275 ITR 146 & the decision of Supreme Court in K.M. Sharma V. ITO 254 ITR 772. The learned AO has rejected this contention vide his letter no. F. No. DCIT Circle 8(1)/2013-14/926 dated 21.08.2013 by tersely observing “Regarding the opinion of G.N. Gupta Advocate it is stated that the above notice has been issued keeping in view the existing provisions

ITA Nos. 5727 & 5728/Del/2014 5 Sir Shadilal Enterprises Ltd. the Income Tax Act, 1961’’. With the greatest respects to the learned AO, the aforemention observation is tautological and the least that can be said about it is that these observations do I amount to a speaking order. In these circumstances, it is submitted that the impugned assess order is barred by limitation and may, therefore, kindly be quashed.”

ITA Nos. 5727 & 5728/Del/2014 6 Sir Shadilal Enterprises Ltd. greater retrospectively than expressly mentioned nor does it authorize the AO to commence proceedings which before the amendment had already become time barred. The appellant has relied upon the decisions of Hon'ble Apex Court in the case of S.S. Gadgil Vs. Lai & Co. (supra) and K.M. Sharma vs. ITO (supra).

7.2. I have considered the facts of the case as well as the submissions made by the appellant on the issue. It is observed that the assessment proceedings for the year under consideration u/s 143(3) were already in progress when a search and seizure operation took place in the related case consequent to which proceedings u/s 153C of the Act were initiated in the appellant’s case. As per the second proviso to section 153A of the Act, the pending assessment proceedings were abated. For the better appreciation of the facts the second proviso to section 153 A of the Act is reproduced as under:

‘‘Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making or requisition under section 132A, as the case may be, shall abate.”

As per the Black’s Law Dictionary, the word 1 abate’’ being verb, its noun ‘abatement’ has been defined as under:

“abatement:- 1. The Act of eliminating or nullifying 2. The suspension or defeat of a pending action for a reason unrelated to the merits of the claim. 3. The Act of lessening or moderating; diminution in amount or degree”

The word ‘Abate’ which is verb corresponding to the noun 4abatement’ derives more closer definition from the ‘2.’ above viz. “The suspension or defeat of a pending action for a reason unrelated to the merits of the claim”. It has also been clarified that although the

ITA Nos. 5727 & 5728/Del/2014 7 Sir Shadilal Enterprises Ltd. term ‘abatement’ is sometimes used loosely as a substitute for ‘stay of proceedings’, the two may be distinguished on several grounds. For example, when grounds for abatement of an action exist, the abatement of the action is a matter of right, but a stay is granted in the court’s discretion. And in proper circumstances a court may stay a proceeding pending the outcome of another proceeding although a strict plea in abatement could not be sustained. The concepts of ‘survival’ and ‘revival’ are intrinsically attached to ‘abatement’.

There is no confusion regarding the abatement of original assessment proceedings consequent to the proceedings u/s 153C of the Act initiated in the appellant’s case. It is observed that when the assessment u/s 153C of the Act in the appellant’s case was annulled by the Hon'ble ITAT on 23.11.2012, the AO resumed the original assessment proceedings on 16.05.2013. Prima-facie the AO has acted on the existing provisions as on 16.05.2013 and as per the existing provisions, section 153A(2) was in statute on that day by which the abated proceedings stood revived w.e.f. the date of receipt of the order of such annulment. On the other hand, the appellant’s plea is that this provision was inserted by the Finance Act, 2008 with retrospective effect from 01.06.2003 and since the proceedings for AY 2004-05 had already got time barred on 31.12.2006, the AO was not empowered to revive such proceedings. To my view, the appellant’s argument is misplaced. It is true that in appellant’s case normal assessment for AY 2004-05 should have been completed by 31.12.2006 but here is a case where the AO had to abate the original assessment proceedings due to search operation in the appellant’s related cases. Thus, the original assessment proceedings which were pending remained suspended unrelated to the merits of the case. As the arrangement of provisions in the Act provides such suspension of proceedings as justified since the AO is empowered to make all possible additions in assessment u/s 153C of the Act what he could have done in normal assessment proceedings. In addition to it, the AO is empowered to make additions based on

ITA Nos. 5727 & 5728/Del/2014 8 Sir Shadilal Enterprises Ltd. seized/requisitioned assets or books of accounts, documents etc. which would not be done in normal assessment proceedings. It is in that sense the proceedings u/s 143(3) of the Act were merged and replaced by proceedings u/s 153C of the Act. Since the matter remained live in the shape of assessment proceedings u/s 153C of the Act till the new amendment through Finance Act, 2008 was introduced w.e.f. 01.06.2003 retrospectively, it cannot be concluded that the revenue was barred by any remedy on annulment of such pending assessment. It is the law applicable on 16.05.2013, which was duly applied by the AO and not the law existing on 31.12.2006, which is being relied upon by the Ld. AR of the appellant. The reliance put by the Ld. AR on the decisions of Hon'ble Supreme Court in the case of S.S. Gadgil Vs. Lal & Co. (supra) and K.M. Sharma vs. ITO (supra) are not applicable in the appellant’s case as facts in both the cases are distinguishable. In both the cases, the assessee’s case was barred by the existing provisions but the amended provisions were applied by the AO for initiating the reassessment proceedings. In the appellant’s case, the assessment proceedings simply remained suspended because of the application of other provision of the Act and therefore it could not be upheld that such suspended proceedings got time barred on 31.12.2006. Secondly, on the date of annulment of proceedings u/s 153C of the Act, the statute had provided the revival of such suspended proceedings. In view of the above, the appellant’s argument that the assessment proceedings were barred by limitation 1 has no merits. The AO is justified in proceeding ahead in the case. Ground No. 1 of the appeal is dismissed.”

ITA Nos. 5727 & 5728/Del/2014 9 Sir Shadilal Enterprises Ltd. 1) Upper Doab Sugar Mills at Shamli Distt. Muzaffar Nagar, 2) Shamli Distillery and Chemical Works at Shamli, Distt. Muzaffar Nagar; & 3) Pilkhani Distillery and Chemical Works at Pilkhani Distt. Saharanpur.

ITA Nos. 5727 & 5728/Del/2014 10 Sir Shadilal Enterprises Ltd. liquor. As per the statement of Mr. Miglani, the money so collected by the UPDA from its member distillery on regular basis was given / distributed to various officials and politicians which basically represented illegal payments. This whole process/activity was coordinated through select committee known as “Core Committee” and Shri Miglani as General Secretary maintained regular accounts of this collection and payments.

ITA Nos. 5727 & 5728/Del/2014 11 Sir Shadilal Enterprises Ltd. 11. Daurala(DCM) 374 1453 310.2 448.6 1585.8 12. Rampur 752 945 599.4 705.6 3002 13. SSL Mansurpur 463 607 374.8 591 2035.8 14. M. Meakins 202 334 204.2 275.6 1015.8 15. Lords (DK Modi) 582 616 404.9 486.9 2089.8 16. Balrampur 298 328 244.5 870.5 17. Central 22 44 32.4 98.4 18. Majhola - - - 72.5 72.5

Shamii and Pilkhani Distilleries both are the units runs by M/s Sir Shadi Lai Enterprises Ltd., Therefore, from the above chart it is clear that M/s Sir Shadi Lai Enterprises Ltd., has paid a sum of Rs. 9,46,99,700/- during the financial years 2002-03, 2003-04, 2004-05 and 2005-06 relevant to the assessment years 2003-04, 2004-05, 2005-06 and 2006-07.”

ITA Nos. 5727 & 5728/Del/2014 12 Sir Shadilal Enterprises Ltd. “A search and seizure action was conducted on 14.02.2006 at the residence of Sh R.K.Miglani, General Secretary UPDA, from where various incriminating documents were seized vide Annexure A-1 to A-10. The search warrant at the residence of Sh. R.K.Miglani contained name of M/s UP Distillers Association (UPDA) and hence proceedings u/s 153A were initiated in the case of UPDA. Hence, Annexures A-1 to A-10 constitute material seized from residence of Sh. R.K.Miglani during the course of search in the case of UPDA.

On the same date i.e. 14.02.2006, a survey u/s 133A was conducted at the premises of M/s Uttar Pradesh Distillery Association (UPDA) from where various incriminating documents were seized vide Annexure A- 1 to A-9.

The Assessing Officer in the case of all assessments u/s 153C in cases of all 11 Distilleries has attached Annexure A (Containing pages 1 to 175) & Annexure B (containing pages 1 to 75) as annexure to the assessment orders. The assessees have not filed these Annexures to the assessment orders in the appeals before appeals to Ld.CIT(A), Hon’ble ITAT or Hon’ble High Court which is mandatory. Failure to file these annexures makes these appeals defective. The onus is upon the assessees to file these annexures which has not been discharged. At this stage, the assessee cannot claim ignorance by stating that it did not receive these Annexures, particularly when they contain copy of incriminating seized material seized during search and relied upon by AO.

A. CASE OF THESE 11 DISTILLERIES IS DISTINGUISHABLE FROM ORDER OF HON’BLE ITAT IN ITA NO. 3787/DEL/2008:

The case of above 11 distilleries is distinguishable from that of M/s Mohan Meakins Ltd. Decided by Hon’ble ITAT in ITA no. 3787/Del/2008 dated 01.08.2017 as follows:

(i) In the order of Hon’ble ITAT in the case of Mohan Meakin Ltd. Vs ACIT (ITA No. 3787 TO 3790/Del/2008),

ITA Nos. 5727 & 5728/Del/2014 13 Sir Shadilal Enterprises Ltd. there was mention of seized papers annexure A-1 to A- 10 which were produced at the time of hearing. However, there was no examination of entries in these seized papers. What was examined was whether these seized documents belong to the assessee or not. Hence, it would be incorrectly held that these documents had already been considered in the first round of appeal proceedings.

(ii) A perusal of assessment orders in the case of Mohan Meakins Ltd. shows that there was no mention of Annexures to the assessment order. However, in the present cases, the assessment orders clearly mention Annexures containing incriminating documents seized during search.

(iii) Hon’ble Delhi High Court vide order dated 22.01.2015 held as follows:

"5. The Revenue urges that the AO and the CIT(A) took note of not merely the document which listed out the payments made in a tabular form for different purposes, but also other documents and materials in the form of production figures, the statement of Mr. R.K. Miglani, and the circumstance that the production figures coincide with the figures available with the Revenue in the pending proceedings. It appears that the Tribunal has not rendered any specific findings on the status of such documents. For instance, if the production figures were in fact forwarded by the concerned unit under a letter or some other form connecting it with the material form seized, inference would be of particular kind.

(iv) The directions of Hon’ble Delhi High Court have not been followed in the subsequent consequential order of ITAT. Hon’ble Delhi High Court had specifically directed to give specific findings on the status of such documents which has not been done.

In Para 6.4 of the Assessment order, the AO has pointed out how production figures of assessee’s books have been found to match with seized material at R.K.Miglani’s residence.

ITA Nos. 5727 & 5728/Del/2014 14 Sir Shadilal Enterprises Ltd.

B. NON CONSIDERATION OF SEIZED MATERIAL BY HON’BLE ITAT AS DIRECTED BY HON’BLE DELHI HIGH COURT:

The Assessing Officer has specifically relied upon incriminating seized documents Annexure A, Pages 1 to 175 & Annexure B, Pages 1 to 75. These pages were not considered in the ITAT order of Mohan Meakin Ltd in ITA no. 3787/Del/2008 dated 01.08.2017 (Copy Enclosed). These incriminating documents clearly prove that the production figures mentioned in them pertained to the Distilleries. Some documents also bear signatures of representatives of the Distilleries. …………

D. FINDINGS IN THE CASE OF PROCEEDINGS U/S 12AA IN THE CASE OF UPDA:

The CIT-III, New Delhi vide order dated 16.11.2009 passed order u/s 12AA of IT Act & cancelled registration granted to UPDA. The cancellation of registration u/s 12AA was upheld by ITAT vide order in ITA No 118/Del/2010 dated 14.02.2017 (Copy enclosed). The relevant findings of Hon’ble ITAT are reproduced in detailed discussion below.

In the above judgment, Hon’ble ITAT has upheld cancellation of registration u/s 12AA and also endorsed following findings of the Assessing Officer:

(i) Upheld validity of statement on oath of Sh RK Miglani recorded u/s 132(4) on 14.02.2006 despite his retraction vide letter dated 03.03.2008 and despite no cross examination of Sh RK Miglani by the assessee. It was held as follows:

(ii) The search at the residence of Sh RK Miglani was a valid search and incriminating documents seized could be relied upon by the Department. In Para 12 it was held that the all the activities under the documents seized are solely attributable to the assessee association as such we find that the CIT is perfectly justified in recording his satisfaction that the

ITA Nos. 5727 & 5728/Del/2014 15 Sir Shadilal Enterprises Ltd. activities of the assessee Association are neither genuine and nor are being carried out in accordance with the object of the association.

(iii) The order u/s 12AA was passed cancelling registration of the assessee primarily due to the fact that the assessee was found to have made illegal payments to bureaucrats and politicians.

The appeal of M/s UPDA against above ITAT order was dismissed by Hon’ble High Court vide order dated 23.10.2017 (copy enclosed) & SLP against the same was dismissed by apex court on 13.04.2018 (Copy enclosed).

Since the above issues have been decided by Hon’ble ITAT and affirmed by Hon’ble Delhi High Court as well as Hon’ble Supreme Court, these issues cannot now be revisited in these proceedings.

E. EVERY POSSIBLE EFFORT WAS MADE BY THE ASSESSEE TO ALLOW CROSS EXAMINATION OF SH. R.K.MIGLANI Detailed discussion given below F. Strong Reliance upon the statement on oath of Sh. R.K.Miglani recorded u/s 132(4) on the date of search. With regard to evidentiary value of statement recorded u/s 132(4) reliance is placed upon following judgments:

(i) Kishore Kumar Vs CIT (62 taxmann.com 215, 234 Taxman 771) (Copy Enclosed) B Kishore Kumar Vs CIT (52 taxmann.com 449) Madras High Court confirmed (Copy Enclosed) (ii) Bhagirath Aggarwal Vs CIT (31 taxmann.com 274, 215 Taxman 229, 351 ITR 143) (Copy Enclosed) (iii) CIT Vs M. S. Aggarwal [2018] 93 taxmann.com 247 (Delhi) (Copy Enclosed) (iv) Smt Dayawanti Vs CIT [2016] 75 taxmann.com 308 (Delhi)/[2017] 245 Taxman 293 (Delhi)/[2017] 390 ITR 496 (Delhi)/[2016] 290 CTR 361 (Delhi) (Copy Enclosed)

ITA Nos. 5727 & 5728/Del/2014 16 Sir Shadilal Enterprises Ltd. (v) M/s Pebble Investment and Finance Ltd Vs ITO (2017-TIOL-238-SC-IT) (Copy Enclosed) M/s Pebble Investment and Finance Ltd Vs ITO (2017- TIOL-188-HC-MUM-IT) Bombay High Court confirmed (Copy Enclosed) (vi) Greenview Restaurant Vs ACIT [2003] 133 Taxman 432 (Gauhati)/[2003] 263 ITR 169 (Gauhati)/[2003] 185 CTR 651 (Gauhati) (Copy Enclosed) (vii) Raj Hans Towers (P.) Ltd. Vs CIT (56 taxmann.com 67, 230 Taxman 567, 373 ITR 9) (Copy Enclosed) (viii) PCIT Vs Avinash Kumar Setia [2017] 81 taxmann.com 476 (Delhi) (Copy Enclosed)

G. On the basis of documents seized from residence of Sh.R.K.Miglani, M/s Radico Khaitan Limited surrendered Rs. 27.50 cr. before Settlement Commission as against unaccounted payments of Rs. 30.02 cr. found recorded.

H. On the basis of documents seized from residence of Sh.R.K.Miglani, M/s Balrampur Chinni Mills Limited surrendered Rs. 8.90 cr. in its revised returns as against Rs. 8.70 cr. found recorded.

I. Similar incriminating documents were also seized from laptop of Sh Ajay Aggarwal, GM of M/s Radico Khaitan Limited. II. J. Saraya Industries Ltd had filed writ petition in Delhi High Court (171 Taxman 194) against proceedings u/s 153C which was dismissed. The findings of Hon’ble Delhi High Court are reproduced in assessment order.

K. In view of the provisions of Section 132(4A) & 292C of I.T.Act, the onus is upon the assessee to show that the notings on the seized papers are incorrect. Reliance is placed on decisions given below

ITA Nos. 5727 & 5728/Del/2014 17 Sir Shadilal Enterprises Ltd. The fact that Hon’ble Delhi High Court has set aside these proceedings with specific directions clearly shows that Hon’ble High Court has not accepted plea of the assessee that the seized material did not belong to them. Reliance is placed upon judgments given below.

DETAILED DISCUSSION:

A. CASE OF THESE 11 DISTILLERIES IS DISTINGUISHABLE FROM ORDER OF HON’BLE ITAT IN ITA NO. 3787/DEL/2008:

In the above case, Hon’ble ITAT Delhi vide order dated 23.11.2012 allowed the appeals of the assessee and quashed the assessments u/s 153C on the ground that no documents belonging to the assessee were found and therefore no assessment u/s 153C can be framed in their cases.

The above conclusion was arrived at primarily by relying upon decision of Hon’ble ITAT Bangalore in the case of DCIT Vs United Spirits Limited (ITA NO. 1375 to 1378/Bang/2010) It may be pointed out that in the entire above order of Hon’ble ITAT, there was mention of seized papers annexure A-1 to A-10 which were produced at the time of hearing. However, there was no examination of entries in these seized papers. What was examined was whether these seized documents belong to the assessee or not.

"5. The Revenue urges that the AO and the CIT(A) took note of not merely the document which listed out the payments made in a tabular form for different purposes, but also other documents and materials in the form of production figures, the statement of Mr. R.K. Miglani, and the circumstance that the production figures coincide with the figures available with the Revenue in the pending proceedings. It appears that the Tribunal has not rendered any specific findings on the status of such documents. For instance, if the

ITA Nos. 5727 & 5728/Del/2014 18 Sir Shadilal Enterprises Ltd. production figures were in fact forwarded by the concerned unit under a letter or some other form connecting it with the material form seized, inference would be of particular kind.

B. NON CONSIDERATION OF SEIZED MATERIAL BY HON’BLE ITAT AS DIRECTED BY HON’BLE DELHI HIGH COURT:

In this regard, it is submitted that the following seized documents clearly prove the fact that the incriminating documents found from premises of Sh RK Miglani pertain to the distilleries as well:

(i) Page 114, Annexure A-1 has the heading "Total account upto date 02-03, 03-04, 04-05 upto Feb 05". It records payment received from different distilleries and payments to different persons/heads. It has been signed by RK Miglani and representatives of Lord & Saraya Industries "Total account upto date 02-03, 03- 04, 04-05 upto Feb 05". It records payment received from different distilleries and payments to different persons/heads. It has been signed in original by the following:

Mr. RK Miglani- general Secretary, UPDA Vishal Shrivastava- Representative of M/s Lord Distilleries Mr. Atual K. Singh-Representative of M/s Lord Distilleries Mr. H.R. Wadhawa - Representative of Saraya Industries

The assessing officer has referred to a large number of incriminating documents found during search in his assessment order. It is categorically stated that the annexures to the assessment order were not considered in the first round of appeal proceedings. The annexures to the assessment order contain details of production figures of the assessee which was found to tally with documents seized from the premises of Sh R.K. Miglani as directed by Hon’ble Delhi High Court.

ITA Nos. 5727 & 5728/Del/2014 19 Sir Shadilal Enterprises Ltd. The following incriminating documents mentioned in the assessment orders clearly prove the fact that these papers belonged to the distilleries:

Seized Details contained in seized Document Annexure to Page of Assessment Document Assessment Order order (A.Y.2003- 04) - -Pages Annexure where mentioned 8 Annexures seized from UPDA Office 10 10 10 Annexures seized from Residence of Sh. Miglani 3 Summary of illegal/unaccounted payments made by various distilleries on the basis of seized documents A-2, Page 11 & 67 List of Core Committee members 7 Annexure A, Pages 46 to 47 Important 10 Annexure B Pg 1- Large computer generated sheets in which 75 details of production of country liquor by pages individual distilleries and contribution to UPDA by each member and basis of calculation Specimen copies of weekly records maintained 10 Annexure B Pg 65- 75 Annexure B Pg 22 A-3, Page 81 10 Total country Liquor produced by each distillery, then converted into no. of cases. Contribution by each distillery is calculated @ Rs.20 per case ( Total Rs. 36,94,410) Annexure-B Pg 14 A-2, Page 69 11 “All Account April 2005 to January 2006”. This is detailed account of money due from each distillery and received in each month. A-3,Page 78 11 Annexure B Pg- “ Distribution of 4.5 crore”. In this, name of 24,25 distillery, actual supply by each distillery, amount to be collected and amount received Annexure B Pg 30 Detail calculation sheets for F.Y. 2003-04 and 11 &31 2004-05 giving details of dispatch schedule of each distillery and amount to be collected from Annexure B Pg 51 Detailed account of Modi Distillery as on 11 23.04.2004 Annexure B A-1 ,Page 123 Money received from members for period April 11 Pg 2 to December 2004 for each distillery Annexure B Pg 5 A-1, Page 115 “Old Govt. Account of 2.00 crores”. It shows 12 collection were for purposes of further payments to bureaucrats and politicians Annexure B Pg 17 A-2 , Page 43 “Overhead Expenses distillery Monthly”. It 12 shows regular payments to district Excise Officer, Dy. Excise Commissioner, Inspector, Annexure B Pg 4 A-1, Page 118 Shows use of funds upto March, 2005 of Rs. 12 11,24,07,500 Annexure B A-1, page 103 “ Summary of Payments” upto February 2005 12 Pg 8 Annexure B Pg 9 A-1, page 94 “Payments made AKG” and Payments made to 12 GDY”

ITA Nos. 5727 & 5728/Del/2014 20 Sir Shadilal Enterprises Ltd. Annexure B Pg 6 A-1, Page 114 “Total Account upto Date 2002-03, 2003- 12 04,2004-05 upto February 05” it records payments received from different distilleries Annexure B Pg 13 List of distilleries with name of persons as 13 representatives & their telephone no. A-9 Production Figures 17 A-4 (UPDA) Production Figures 17 A-3, Page 94 A-6, Total country Liquor produced by each 17 Page 3 distillery, then converted into no. of cases. Contribution by each distillery is calculated @ Verification of Production Figures as per 17 assessee and documents seized from premises of R.K.Miglani Annexure A Pg 56 Revised working of generation/ expenditure in 24 cash for F.Y. 2004-05 A-2, Page13 Rs. 2.63cr. have been paid by M/s Saraya 25 (assessee Industries Limited to UPDA. premises) A-2, Page 69 Amount received from the assessee by UPDA 25 Annexure A Pg 61 A-2,Page 57 Fax dated 26.10.2005 from Sh. K P Singh 25 marked as ‘Final’. It contains details of share of investment of all distilleries during the year 2 pages seized from Contains details of monthly illegal payments for 22 laptop of Ajay F.Y. 2004-05 which match with pages showing Aggarwal details seized from Sh.R.K. Miglani

In this regard, Hon’ble ITAT Delhi in the case of Mohan Meakin Ltd. Vs ACIT (ITA No. 3787 TO 3790/Del/2008) in para 5.7 of its order held as follows:

"5.7 Even at the risk of being repetitive, we record that in spite of view of the directions of the Hon'ble High Court and despite the fact that the revenue produced only Annexures A-1 to A-10 found from the premises of Shri Miglani, which was already on record before the ITAT, a specific query, was raised by the Bench to the learned CIT DR, that apart from the aforesaid, whether there is any other document which has been made the basis of recording of the satisfaction note and also the addition made in the order of assessment, and learned CIT DR has submitted that apart from the aforesaid, there are no other documents which had been made the basis of initiation of the proceedings as well as for making the addition. He was also asked to show any such document seized from the premises of searched persons, which could suggest that any production

ITA Nos. 5727 & 5728/Del/2014 21 Sir Shadilal Enterprises Ltd. figure was forwarded by assessee "as was contended by Revenue before Hon'ble High Court". In response, the learned CIT DR placed reliance on the seized annexures A-1 to A-10, found from the residential premises ofSh. R.K. Migalni during the course of search on 14.02.2006 and referred to various pages of seized annexures. However, nowhere, the learned CIT DR has been able to show any such document, which could suggest that any document showing production figures was in fact forwarded by the assessee to Sh. R.K. Miglani or M/s UPDA. He again placed reliance on the statement of Sh. R.K. Miglani recorded during the search on his residential premises and also at the business premises of M/s UPDA, wherein Sh. Miglani had stated that production figures had been recorded by him on the basis of fax messages forwarded by various member distilleries of UPDA. However, not even one such alleged fax message with regard to the assessee has been produced before us by the revenue as seized annexure does not contain any such document. These arguments placed by learned CIT DR have already been dealt by Tribunal in the first round of proceedings and nothing new has been brought on record by the Revenue even though specific plea was raised by the Revenue before the Hon'ble High Court of Delhi."

Thus, Hon’ble ITAT allowed relief on the following two grounds:

(i) Annexures A-1 to A-10 found from premises of Sh R.K. Miglani were already on record and had already been considered in the first round of proceedings

(ii) That the department failed to produce seized documents which could suggest that any production figure was forwarded by assessee “as was contended by Revenue before Hon’ble High Court.”

In this regard, it is submitted as follows:

(i) In the order of Hon’ble ITAT in the case of Mohan Meakin Ltd. Vs ACIT (ITA No. 3787 TO 3790/Del/2008), there was mention of seized papers annexure A-1 to A-

ITA Nos. 5727 & 5728/Del/2014 22 Sir Shadilal Enterprises Ltd. 10 which were produced at the time of hearing. However, there was no examination of entries in these seized papers. What was examined was whether these seized documents belong to the assessee or not. Hence, it would be incorrect to state that these documents had already been considered in the first round of appeal proceedings.

(ii) In this regard, reliance is also placed on the decision of Hon’ble Delhi High Court in the case of PCIT Vs Super Malls Pvt Ltd [2016] 76 taxmann.com 267 (Delhi)/[2017] 393 ITR 557 (Delhi)/[2017] 291 CTR 142 (Delhi) (Copy Enclosed) where Hon’ble Delhi High Court held that where Assessing Officer had issued satisfaction note under section 153C after satisfying himself with contents of documents seized, Tribunal could not declare it as invalid on hyper technical ground of incorrect terminology used in said note. Satisfaction note recorded u/s 153C in respect of the assessee, being the third party, could not be said to be invalid on a hyper technical ground by interpreting the expression "belonging to" too literally.

In view of the above facts, it would amount to going against decision of Hon’ble Delhi High Court if the assessments are again quashed on the ground that annexure A-1 to A-10 do not belong to the assessee.

FINDINGS IN THE CASE OF PROCEEDINGS U/S 12AA IN THE CASE OF UPDA:

“9. Now we’ll have to see whether Mr Miglani has anything personal in doing all these things. Is an admitted fact that he is the Secretary General of the assessee association during relevant period. The statement of Mr Miglani clearly establishes that all the

ITA Nos. 5727 & 5728/Del/2014 23 Sir Shadilal Enterprises Ltd. transactions covered by the documents which are confronted to him are in pursuance of the interest of the members of the assessee Association and there is nothing personal interest involved in it. In such a situation the natural inference that follows is that it’s not as though Mr Miglani was acting in his personal capacity but he was acting in furtherance of the interest of the members of the assessee Associations. In such a situation it is not permissible for the assessee to say that whatever Mr Miglani has done by way of the transaction covered under these documents , was done in his individual capacity. Should there be any personal benefits to Mr. Miglani de horse the interest of the members of the Association, such an arguments would hold water. But in this matter it seems that all the transaction covered under the seized documents were in furtherance of the members of the Association, maybe by way of illegal means.

ITA Nos. 5727 & 5728/Del/2014 24 Sir Shadilal Enterprises Ltd. assessee to say that these activities are not attributable to the assessee Association or that those are conducted by Mr Miglani in his individual capacity.

ITA Nos. 5727 & 5728/Del/2014 25 Sir Shadilal Enterprises Ltd. the authorities for giving clarification on this aspect. Retraction of any statement more than two years after its original making does not carry much weight. Further there is no acceptable explanation as to why the assessee was not producing its Secretary General before the authorities to give a clarification as to his stand viz-a-viz the stand of the assessee. In these circumstances, we hold that the activities of Mr Miglani covered by the documents that were seized and confronted him were intimately relating to the common interest of the members of the association and he coordinated all such activities not in his individual capacity but only as the Secretary General of the association, for otherwise there is no occasion for him to indulge in such activities. We, therefore, hold that the all the activities under the documents seized are solely attributable to the assessee association as such we find that the CIT is perfectly justified in recording his satisfaction that the activities of the assessee Association are neither genuine and nor are being carried out in accordance with the object of the association.” In the above judgment, Hon’ble ITAT has upheld cancellation of registration u/s 12AA and also endorsed following findings of the Assessing Officer:

(i) Upheld validity of statement on oath of Sh RK Miglani recorded u/s 132(4) on 14.02.2006 despite his retraction vide letter dated 03.03.2008 and despite no cross examination of Sh RK Miglani by the assessee. It was held as follows:

(ii) The search at the residence of Sh RK Miglani was a valid search and incriminating documents seized could be relied upon by the Department. In Para 12 it was held that the all the activities under the documents seized are solely attributable to the assessee association as such we find that the CIT is perfectly justified in recording his satisfaction that the activities of the assessee Association are neither genuine and nor are being carried out in accordance with the object of the association.

ITA Nos. 5727 & 5728/Del/2014 26 Sir Shadilal Enterprises Ltd. (iii) The order u/s 12AA was passed cancelling registration of the assessee primarily due to the fact that the assessee was found to have made illegal payments to bureaucrats and politicians.

The appeal of M/s UPDA against above ITAT order was dismissed by Hon’ble High Court vide order dated 23.10.2017 (copy enclosed) & SLP against the same was dismissed by apex court on 13.04.2018 (Copy enclosed).

Since the above issues have been decided by Hon’ble ITAT and affirmed by Hon’ble Delhi High Court as well as Hon’ble Supreme Court, these issues cannot now be revisited in these proceedings.

E. CROSS EXAMINATION OF SH. R.K.MIGLANI

(i) Every possible effort made to allow cross examination

With regard to cross examination of Sh R.K.Miglani, as mentioned in para 4.4 of the assessment order, summons u/s 131 were issued to him on 01.03.2006, 10.08.2006, 30.11.2007, 04.08.2008 & 17.10.2008 during post search investigation as well as during assessment proceedings. Every effort was made by the department to allow cross examination. However^Sh R.K.MigIani did not appear for cross examination to assist the assessee who had employed him explicitly/ implicitly. On page 15 of the assessment order, AO has stated as follows:

‘As already stated above, in view of these circumstances since Mr. Miglani is implicitly/ explicitly an employee of the assessee (the assessee being a member of UPDA) & Mr. Miglani acts and works under the whims of the members of UPDA what postulates is that he is not appearing for cross examination under the influence and if the assessee wants to take any benefit from his cross examination, it was quite open for the assessee to produce Sh Miglani for such cross examination In this regard, reliance is placed upon the judgment of Hon’ble Supreme Court in the case of ITO

ITA Nos. 5727 & 5728/Del/2014 27 Sir Shadilal Enterprises Ltd. Vs M. Pirai Choodi (f2012l 20 taxmann.com 733 (SC)/f2011l 334 ITR 262 (SC)/r20111 245 CTR 233 (SC) (Supreme Court) (Copy Enclosed) where Hon'ble Supreme Court held that order of assessment passed without granting an opportunity to assessee to cross- examine, should not have been set aside by High Court: at most. High Court should have directed Assessing Officer to grant an opportunity to assessee to cross-examine concerned witness.

(ii) Statement of Sh. R.K. Miglani at his residence u/s 132(4) & 133 A at the office premise of UPDA of IT Act supports the view that the above seized documents belong to the members of UPDA including the appellant.

Specific instances are quoted as under:-

(a) Answer in response of Q.3 of Sh. R.K.Miglani at the office of UPDA during 133A proves that the complete data of dispatch was received from the members. Answer question no. 5 during survey states that the data received from his residence are related data taken out from drive 'F' from the computers at the office, therefore, the data of dispatch seized from the residence is prepared on the basis of fax received from the members of UPDA including the appellant.

(b) Answer to Question No.8 at residence u/s 132(4), Sh. R.K. Miglani has stated that it received data of dispatch from the members of UPDA including the appellant on weekly basis.

(c) Vide answer question No. 10 to 24 during his statement u/s 132 (4) at his residence, Sh. R.K. Miglani has stated that seized documents contains the figure of details of illicit payment made various Govt. Officer and Politicians by various members and its computation based on the quantity of dispatch received from the members of UPDA.

(d) The details of illegal payment made by the member of UPDA in during the appellant to various Govt, authority were received from core distillery by

ITA Nos. 5727 & 5728/Del/2014 28 Sir Shadilal Enterprises Ltd. Sh. R.K. Miglani refer to Question and answer No 13 of Sh. R.K. Miglani.

In view of specific dispatch data received from the member of UPDA and details of illegal payment by various members of UPDA, maintained by Shri Miglani on the basis of such dispatch figure belong to the appellant, the entry of dispatch belongs to the appellant and are part of the books of accounts of the appellant, which has been provided to UPDA for specific purposes for computing the facilitation money given to Govt, officers /politicians. These documents are for various F.Y's. maintained monthwise/yearwise. Therefore, these documents belong to the various members of UPDA jointly. Each members of UPDA partially owns these documents containing data of dispatch of country made liquor and computation of illicit payment made to Govt. Officers/politicians, and details of such money received and amount due. In any case, these documents cannot be said to belong to Sh. R.K. Miglani or UPDA as these two persons are not engaged in the business of manufacturing of country liquors. Therefore on this ground also belongingness/ownership of these paper lie with the member of UPDA needless to mention that name of members of UPDA is specifically mentioned on various seized documents and Sh. R.K. Miglani has explained that these documents specially dispatch figure was received from members.

(iii) Not providing cross examination of Sh. R.K. Miglani is irrelevant:—

Ld. AR has relied on various judicial pronouncements that statement without cross examination cannot be considered as evidence. These judicial pronouncements are distinguishable on facts as in those cases witness was independent and not related person. In present case as Sh. R.K. Miglani is Secretary General of UPDA in which the appellant is a member. Therefore, if the statement of Sh. R.K. Miglani which was adverse to the member was untrue than immediately Sh. R.K. Miglani could have been removed from the post of Secretary General, UPDA, or Sh. R.K. Miglani could have brought

ITA Nos. 5727 & 5728/Del/2014 29 Sir Shadilal Enterprises Ltd. before I.T. Authority for retraction or modification of statement.

Further, statement of Sh. Miglani is not on stray/dumb documents but contains the figures of dispatch and amount of illegal payment made by members which is clear from the notings of the seized documents. Therefore, Sh. Miglani has only confirmed the specific variation contained in the seized material.

Still further, Sh. R.K. Miglani being employee of UPDA is an interest person and associates of the members of UPDA. Therefore, the appellant and other members of UPDA could itself has produced Sh. R.K. Miglani, if his statement was untrue and could not have waited for the revenue to offer cross examination.

(iv) Retraction of Sh. R.K. Miglani has no evidential value on the following grounds:-

(a) Retraction of Sh. R.K. Miglani was made after two years from the statement recorded u/s 132(4). Therefore it is after thought. (b) The retraction of statement was not submitted before the Assessing Officer but before CIT(C)-l 11, Delhi, during the proceeding for withdrawal of registration u/s 12AA(3) in case of UPDA. Further, the date of affidavit in just one day prior to submission before CIT (c)-lll during the proceeding u/s 12AA(3) this also proves that such retraction was necessitated because of threat of cancelation of registration u/s 12AA(3). Therefore on this basis also, it is afterthought. The result and further investigation in such retraction has not been submitted.

(c) The appellant has filed this retraction of Sh. R.K. Miglani first time as fresh evidence and has not submitted the same in appellate proceeding in first till Hon'ble High Court. The Ld. AR has neither filed certified copy nor produced Sh. Miglani in person, therefore, this fresh evidence should not be entertained.

ITA Nos. 5727 & 5728/Del/2014 30 Sir Shadilal Enterprises Ltd. (d) The most important aspect of retraction is that during statement, Sh. R.K. Miglani has explained the apparent contents of seized document. In retraction Statement he has not submitted the meaning of the contents of such seized documents, otherwise.

(v) Findings in the case of UPDA by the AO are relevant:-

Ld. AR's argument that AO in the case of UPDA has held in Para 10(b) that the seized document belong to UPDA and therefore does not belong to the members. This finding is not factually correct as AO of UPDA in Para 6.15 has himself held that these documents belong to the members.

Further, UPDA is not manufacture of Alcohol, therefore question of dispatch of Alcohal in UPDA's case has no meaning. Therefore, essentially all computation and receipt of money and reimbursement based on such dispatch belong to members of UPDA who are in Alcohal manufacturing business.

(vi) Findings of CIT(A) in appellant's case: Findings of CIT(A) in appellant's case in the order that the document pertains to the appellant firstly does not prove that these documents do not belong to appellant as finally CIT(A) has dismissed the appeal and held that these documents belong to the appellant and therefore Section 153C has rightly been invoked.

Further words 'pertains to' is a bigger set and 'belonging to' is submerged in that bigger set.

(vii) Ld. AR's argument that statement of Sh. Ashok Dutt & Sh. Rahul Jain of M/s PDL that the financial power vests with appellant cannot be relied as cross examination was not offered, cannot be accepted.

In this case also Sh. Ashok Dutt & Sh. Rahul Jain was the employee of PDL therefore, these persons were not independent witness but business associate of the appellant with whom the appellant continued its business even after giving adverse statement. In these

ITA Nos. 5727 & 5728/Del/2014 31 Sir Shadilal Enterprises Ltd. circumstances as witness was not independent, judicial pronouncements relied by Ld. AR for providing opportunity of cross examination to treat statement as evidence will not apply in present case.

Further, PDL admittedly was only supervising the Lucknow Plant with two persons. Plant was run by the employees of the appellant, plant & machinery of the appellant and sales are effected by the head of the appellant. These are undisputed facts. Further the appellant is a member of UPDA and not PDL. Therefore, unaccounted expense incurred has to be borne by the appellant and not PDL.

(viii) Ld. AR's argument that in the case of Radico Khaitan, in the order of u/s 245D(4), Settlement Commission have not accepted Rule 9 report of CIT(C)- lll for enhancement of income by the figure of unaccounted payment as per seized document. A perusal of order u/s 245D(4) reveals that as per order total income settled in the case of M/s Radico Khaitan was for Rs. 30 crores. The source & basis of initial offer is not discussed in the order. Undisputedly, the M/s Radico Khaitan has filed application before Settlement Commission on the basis of search conducted in its case as well as at R.K. Miglani's premises. The only finding of search is in respect of unaccounted payment made by the members of UPDA. Therefore acceptances of additional income before Settlement Commission confirm unaccounted payment.

(ix) If Hon'ble ITAT confirm, legality of the proceedings u/s 153C in appellant's case, quantification of unaccounted payment can be restored to the AO on the basis of seized document and other evidences, books of accounts impounded during survey u/s 133A in UPDA's office and statement of Sh. R.K. Miglani, if any mistakes are found in figure either in the satisfaction u/s 153C or quantification of income while passing assessment order."

It is further submitted as follows:

ITA Nos. 5727 & 5728/Del/2014 32 Sir Shadilal Enterprises Ltd. 1. During the course of assessment proceedings, details of production and dispatch figures of all assessees was compared with the figures found recorded in the seized documents. The figures on the seized documents were found to almost tally with the figures in the books of account of the assessee.

Hon’ble Delhi High Court had given specific direction to verify whether production figures of the assesses match with the documents seized from residence of Sh. R. K. Miglani. This answers an important query raised by Hon’ble Delhi High Court.

Presumption u/s 132(4A) & 292C is available in the case of UPDA where assessment has been made u/s 153A. The amounts added in the hands of UPDA as unaccounted receipts are added in the hands of Distilleries as unexplained expenditure. Thus, if additions are sustained in the hands of UPDA in view of presumption u/s 132(4A) & 292C, these additions cannot be deleted in the hands of Distilleries.

It is humbly submitted that the following decisions may kindly be considered with regard to validity of statement recorded u/s 132(4) of I.T. Act:

ITA Nos. 5727 & 5728/Del/2014 33 Sir Shadilal Enterprises Ltd.

where Hon’ble Supreme Court dismissed SLP against High Court's order where it was held that since assessee himself had stated in sworn statement during search and seizure about his undisclosed income, tax was to be levied on basis of admission without scrutinizing documents.

B Kishore Kumar Vs CIT (52 taxmann.com 449) Madras High Court confirmed (Copy Enclosed)

where Hon’ble Delhi High Court held that an addition in assessee's income relying on statements recorded during search operations cannot be deleted without proving statements to be incorrect.

where Hon’ble Delhi High Court held that where inferences drawn in respect of undeclared income of assessee were premised on materials found as well as statements recorded by assessee's son in course of search operations and assessee had not been able to

ITA Nos. 5727 & 5728/Del/2014 34 Sir Shadilal Enterprises Ltd. show as to how estimation made by Assessing Officer was arbitrary or unreasonable, additions so made by Assessing Officer by rejecting books of account was justified.

where Hon’ble Supreme Court dismissed SLP challenging the judgment, whereby the High Court had held that statement made u/s 133A could be relied upon for purposes of assessment, in absence of any contrary evidence or explanation as to why such statement made was not credible.

M/s Pebble Investment and Finance Ltd Vs ITO (2017- TIOL-188-HC-MUM-IT) Bombay High Court confirmed (Copy Enclosed)

ITA Nos. 5727 & 5728/Del/2014 35 Sir Shadilal Enterprises Ltd. 7. Raj Hans Towers (P.) Ltd. Vs CIT (56 taxmann.com 67, 230 Taxman 567, 373 ITR 9) (Copy Enclosed)

where Hon’ble Delhi High Court held that where assessee had not offered any satisfactory explanation regarding surrendered amount being not bona fide and it was also not borne out in any contentions raised before lower authorities, additions so made after adjusting expenditure were justified

where Hon’ble Delhi High Court held that Where assessee surrendered certain income by way of declaration and withdraw same after two years without any satisfactory explanation, it could not be treated as bona fide and, hence, addition would sustain.

In the above case, it is humbly submitted that the following decisions may kindly be considered with regard to presumption of entries found recorded in books of account seized during search as per sections 132(4A) & 292C of I.T. Act:

where Hon’ble Delhi High Court held as follows:

“the Tribunal has also held that the presumption about the genuineness and truth of the contents of the documents seized, as provided in Section 132(4A), was not available to the AO in the assessment proceedings. The judgment of the Supreme Court in the case of P. R. Met rani, no doubt held that the presumption was not available to the AO while completing the assessment and that it was limited to the prior proceedings in connection with the search. However, there was a later statutory amendment; Section 292C was introduced by the Finance Act, 2007 with retrospective effect from 1.10.1975;

ITA Nos. 5727 & 5728/Del/2014 36 Sir Shadilal Enterprises Ltd. ++ the phrase “in any proceeding under this Act” in sub-section (1) to section 292C are important. They permit the AO to invoke the presumption that the seized documents belonged to the person searched, that the contents of the seized documents/books of accounts are true and that the signature of every other part of the books of accounts or documents which purports to be in the handwriting of any particular person are in that person's handwriting etc., even in the assessment proceedings. After the insertion of the section, the judgment of the Supreme Court cited above can no longer be called in aid to hold that the presumption is not available to the AO in makinq the assessment; the Tribunal has reasoned that the seized papers are loose papers and not books of accounts. We are unable to appreciate the significance or sequitur of the statement made by the Tribunal. It is not necessary that the seized documents should be in the form of proper books of accounts so that they can be relied upon for the purpose of making additions. They could be In any form, including loose papers on which notings or scribblings have been made. While commenting on the seized documents, the Tribunal contradicted itself by first observing that it cannot be stated that the figures in the papers were the actual investment or the actual sale proceeds and thereafter, in the very next sentence, stating that the seized documents “did give out certain figures regarding the four projects that the assessee had undertaken in the course of his business. ” If the seized papers did in fact contain figures relating to the four projects which were admittedly undertaken by the assessee, we do not see how the Tribunal could hold that the Revenue could not rely on the correlation between the position shown by the seized documents and what has been recorded by the assessee in its books of account. The Tribunal does not dispute that there existed a correlation; but it yet held that the correlation alone was not sufficient to make the impugned additions. This observation was sought to be supported by some reasons;

++ an examination of those reasons shows that they are far from convincing. The Tribunal held on the basis

ITA Nos. 5727 & 5728/Del/2014 37 Sir Shadilal Enterprises Ltd. of the judgment of the Supreme Court in the case of P. R. Metrani that the presumption about the truth and genuineness of the contents of the seized documents and its handwriting was not available to the AO in the course of the assessment proceedings. This position has now been nullified by the retrospective amendment. Even otherwise, there is no merit in the conclusion of the Tribunal that the correlation between the seized material and the books of account, on which reliance was placed by the AO, was not sufficient for the purpose of making the additions;”

where Hon’ble Delhi High Court held that there was a presumption raised under section 132(4A) on seizure of fax message and it was upon assessee to rebut that presumption by offering a plausible explanation.

where Hon’ble Jharkhand High Court held that loose sheets seized during search sometimes contain valuable information and thus those are to be regarded as ' documents' within meaning of section 158B(b). There is presumption raised under section 132(4A) regarding documents seized and in light of such presumption, assessee ought to have produced other documents to disprove entries made in loose sheets.

where Hon’ble Kerala High Court held that in view of introduction of section 158BH presumption under section 132(4A) regarding ownership of seized assets was not limited to proceedings for search and seizure under section 132, and was also available for framing regular assessment.

ITA Nos. 5727 & 5728/Del/2014 38 Sir Shadilal Enterprises Ltd.

where Hon’ble Patna High Court held that where Assessing Officer passed income escaping assessment on basis of a loose sheet found in premises of father of assessee, action of Assessing Officer was justified being based on relevant material and, merely, because he used wrong presumption in assessment order it would not change nature of order.

Assessee submitted that presumption under section 132(4A) of the Act was rebuttable and the assessee led evidence to rebut the said presumption. There is no dispute about the proposition that presumption can be rebutted nor the Tribunal has held to the contrary. The Tribunal has held that the assessee failed to rebut the presumption, which is purely a finding of fact. Hon’ble Punjab & Haryana High Court held that no substantial question of law arises from the impugned order.”

“The ITAT Order dated 14.12.2018 has not considered the facts correctly.

In para 193 of ITAT order it is stated as follows:

“193. Both the Id. AR and Id. DR have supplied the copy of Warrant of Authorization which is part of record. A perusal of Warrant of Authorization u/s 132 of the Act shows the names of the following persons:

ITA Nos. 5727 & 5728/Del/2014 39 Sir Shadilal Enterprises Ltd. 194. Address on which this Warrant of Authorization was to be executed is P/25, 1st Floor, South Extension, Part - 2, New Delhi. Indeed, the name of the assessee is very much there in the Warrant of Authorization but the name of the premises is where Shri R.K. Miglani resided. This means that no Warrant of Authorization u/s 132 of the Act was executed at the premises of the assessee on 14.02.2006.”

Contradictory finding in para 198 & 199:

“198. At this stage, it is pertinent to mention that on 14.02.2006, when both operations took place, statement of Shri R.K. Miglani was recorded u/s 132(4) of the Act at the premises and u/s 133A of the Act at the premises of the assessee. This also makes it clear that Shri R. K. Miglani was searched and UPDA was surveyed. Otherwise, there was no need for examining Shri R.K. Miglani under two different sections i.e. 132(4) and 133A of the Act. 199. If the search warrant was never executed at the premises of the assessee, it leads to only one conclusion that the assessee was never searched. If the assessee was never searched u/s 132 of the Act, assessments framed u/s 153A of the Act are bad in law because provisions of section 153A provides for assessment in case of search or requisition.”

Hon’ble ITAT is the highest fact finding authority. Stating that there was name of the assessee in search warrant at P/25, 1st Floor, South Extension, Part - 2, New Delhi and then holding proceedings u/s 153A are invalid on the ground that no Warrant of Authorization u/s 132 of the Act was executed at the premises of the assessee is absurd. It was held that proceedings u/s 153A are bad in law since there was no search at premises of the assessee which is a perverse finding considering the fact that the Bench admits that name of the assessee was there in the search warrant at residence of Sh. R.K.Miglani Since the Department had information that books of the assessee were kept at residence of Shri R.K. Miglani, name of the assessee was entered in the search warrant. In fact claim of the Department is that since the search warrant at the

ITA Nos. 5727 & 5728/Del/2014 40 Sir Shadilal Enterprises Ltd. residence of Sh. R.K.Miglani contained name of M/s UP Distillers Association (UPDA), proceedings u/s 153A were rightly initiated in the case of UPDA and Annexures A-1 to A-10 seized from residence of Sh. R.K.Miglani constitute incriminating material during the course of search in the case of UPDA and presumption u/s 132(4A) will apply to the assessee. Even this argument of the assessee with regard to presumption u/s 132(4A) has been conveniently ignored in the ITAT order.

In para 208 of ITAT order it is stated as follows:

“208. The Assessing Officer has mentioned that what was taken out from the computer at UPDA premises were only copies of papers impounded from the residence of Shri R.K. Miglani. What was found from the residence of Shri R.K. Miglani cannot be construed as documents belonging to the assessee to trigger the provisions of section 153 of the Act unless in the case of Shri R.K. Miglani his Assessing Officer is satisfied that these documents do not belong to Shri R.K. Miglani but belong to UPDA. However, having made these observations, we would like to make it clear that the impugned assessments are not a product of section 153C but section 153A of the Act.”

It is a factually incorrect finding. The papers seized from residence of Sh R.K.Miglani (Annexure A-1 to A- 10) were totally different from papers impounded from office of UPDA (Annexure A-1 to A-9).

It is observed that written reply as well as arguments of CIT DR have not been considered, which are summarized below:

ITA Nos. 5727 & 5728/Del/2014 41 Sir Shadilal Enterprises Ltd. hundreds of lose papers containing notings of payments outside books of account were seized.

It is surprising that Hon’ble ITAT in its para 72 has held that failure to allow cross examination was denial of principle of natural justice whereas Hon’ble Supreme Court in the case of assessee itself has held the statement to be valid and based upon it cancelled registration u/s 12AA 4. The CIT(DR) heavily relied upon the fact that presumptions u/s 132(4A) was available since the documents were seized from premises of the assessee. ITAT has not considered this argument. Moreover, it has held the proceedings u/s 153A themselves to be invalid.

IN THE SUPREME COURT OF INDIA M/s U P DISTILLERS ASSOCIATION Vs COMMISSIONER OF INCOME TAX CENTRAL-III Adarsh Kumar Goel & Rohinton Fali Nariman, JJ

Dated: April 13, 2018

ITA Nos. 5727 & 5728/Del/2014 42 Sir Shadilal Enterprises Ltd.

Income Tax - SLP - Sections 12AA & 132(4)

THE assessee, a trust, was registered under the Act. During the relevant AY, search operations were conducted at the premises of one an individual, who was the General Secretary of the assessee. His statements were recorded u/s 132(4). Later such statements were retracted, although the letter of retraction was filed after a considerable period of time. Meanwhile, based on the material and documents seized, the CIT invoked the provisions of Section 12AA(3) to cancel the registration of the assessee. Such order was later upheld by the Tribunal. Subsequently, the High Court too held that registration granted to a trust can be cancelled u/s 12AA(3), relying upon the statement of person concerned recorded u/s 132(4). Hence the assessee's appeal.

On hearing the matter, the Apex Court was of the view that,

Whether the registration of a trust can be cancelled u/s 12AA(3) based on statements of a person related to such trust u/s 132(4) - YES: SC

There are no grounds to interfere with the order. Pending applications, if any, set aside as well.

Assessee's SLP Dismissed

JUDGEMENT

Heard learned counsel for the petitioner.

Delay condoned.

We do not find any ground to interfere with the impugned order. The special leave petition is, accordingly, dismissed.”

ITA Nos. 5727 & 5728/Del/2014 43 Sir Shadilal Enterprises Ltd.

ITA Nos. 5727 & 5728/Del/2014 44 Sir Shadilal Enterprises Ltd. document. In our understanding, the term “belongs to” is not synonymous to the expression “pertaining to” or “relating to”.

ITA Nos. 5727 & 5728/Del/2014 45 Sir Shadilal Enterprises Ltd. who had collected the alleged sum to have been contributed and what is the destination of such sum. In none of the documents, name of the payee, any public servant or politician appears. This itself establishes that the documents are dumb.

………….. ……………

“11. In the present case the Assessing Officer has placed reliance on the statement of Smt.Sarla Aggarwal, daughter of the assessed while arriving at the conclusion, that the entries belong to the transactions of the assessed. This statement made by Smt.Sarla Gupta, cannot be said to be relevant or admissible evidence against the assessed, since the assessed was not given any opportunity to cross-examine her and even from the statement, no conclusion can be drawn that the entries made on the relevant page belongs to the assessed and represents his undisclosed income. It is also an admitted fact that the statement of the assessed was not recorded at any stage during the assessment proceedings. The only conclusion which can be drawn about the nature and contents of the document is that it is a dumb document and on the basis of the entry of nothings or figure etc. in this document, it cannot be concluded that this represents the undisclosed income of the assessee.”

ITA Nos. 5727 & 5728/Del/2014 46 Sir Shadilal Enterprises Ltd. 65. The Hon'ble Supreme Court in the case of Andaman Timber Vs. CIT in Civil Appeal No. 4228 OF 2006 has held as under:

“According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity in as much as it amounted to violation of principles of natural justice because of which the assessee was adversely affected.”

“Section 132(4) in The Income- Tax Act, 1995

(4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is fond to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income- tax Act, 1922 (11 of 1922 ), or under this Act. 1 Explanation.- For the removal of doubts, it is hereby declared that the examination of any person under this sub- section may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Indian Income- tax Act, 1922 (11 of 1922 ), or under this Act.]

Section 132(4A) in The Income- Tax Act, 1995

(4A) 2 Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed-

(i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;

(ii) that the contents of such books of account and other documents are true; and

ITA Nos. 5727 & 5728/Del/2014 47 Sir Shadilal Enterprises Ltd.

(iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person' s handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.]

Section 292C [l)] Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession ol of any person in the course of a search under section 132 20[or survey section 133A], it may, in any proceeding under this Act, be presumed—

1 i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;

ii) that the contents of such books of account and other documents are true; and

iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person’s handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.

Where any books of account, other documents or assets have been d to the requisitioning officer in accordance with the provisions of 132A, then, the provisions of sub-section (1) shall apply as if such books of account, other documents or assets which had been taken into custody from on referred to in clause (a) or clause (b) or clause (c), as the case may be, of sub-section (1) of section 132A had been found in the possession or control of that person in the course of a search u/s 132.”

ITA Nos. 5727 & 5728/Del/2014 48 Sir Shadilal Enterprises Ltd. or UPDA. But not in the cases of “the other person” which are the distilleries in the present appeals. Therefore, the judicial decisions relied upon by the ld. DR are misplaced and, therefore, needs no specific mention.

ITA Nos. 5727 & 5728/Del/2014 49 Sir Shadilal Enterprises Ltd. 22. In the result, both the appeals of the assessee are allowed. Order Pronounced in the Open Court on 16/12/2019

Sd/- Sd/- (Amit Shukla) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 16/12/2019 *Subodh* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR