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Income Tax Appellate Tribunal, IN THE INCOME TAX APPELLATE TRIBUNAL
Before: SHRI & AND & SHRI SUDHANSHU SRIVASTAVA SHRI SUDHANSHU SRIVASTAVASHRI SUDHANSHU SRIVASTAVA SHRI SUDHANSHU SRIVASTAVA
PER G.D. AGRAWAL, VICE PER G.D. AGRAWAL, VICE PRESIDENT PRESIDENT :- PER G.D. AGRAWAL, PER G.D. AGRAWAL, VICE VICE PRESIDENT PRESIDENT
The appeal by the Revenue and the cross-objection by the assessee for the assessment year 2010-11 are directed against the order of learned CIT(A)-XXXII, New Delhi dated 16th September, 2013.
2 ITA-6576/D/2013 & C.O. No.300/D/2016
2. The facts of the case are that proceedings under Section 153C were initiated by the Assessing Officer on the basis of search in the case of M/s Jagat Agro Commodities Pvt.Ltd. and M/s Jagat Projects Ltd. The assessment was completed u/s 143(3)/153C at `5,98,52,000/- as against nil income declared by the assessee. Before the learned CIT(A), the assessee challenged the initiation of proceedings under Section 153C as well as the addition on merits. Learned CIT(A) upheld the initiation of proceedings u/s 153C but deleted the addition of `5,98,52,000/- made by the Assessing Officer. The Revenue, aggrieved with the deletion of the addition, is in appeal before us while the assessee, by filing the cross-objection, has challenged the validity of proceedings under Section 153C itself.
3. At the time of hearing before us, it is stated by the learned counsel that the issue of validity of proceedings under Section 153C is squarely covered in favour of the assessee by the decision of Hon'ble Jurisdictional High Court in the case of Principal CIT Vs. Index Securities Private Limited vide to 571/2017. He stated that the other companies are the group companies of this group and the cases were reopened under Section 153C on the basis of material found and seized during the course of search of M/s Jagat Agro Commodities Pvt.Ltd. The same seized material was considered by the Hon’ble High Court which is considered here in this appeal before us for initiation of proceedings under Section 153C. He referred to paragraph 8 onwards of the order of learned CIT(A) and pointed out that learned CIT(A) has recorded the finding that the notice under Section 153C was initiated on the basis of audited balance sheet as on 31st March, 2009 of the assessee being found with M/s Jagat Agro Commodities Pvt.Ltd. He stated that neither the material found was incriminating nor relevant to the assessment year under consideration because assessment year under consideration is 2010-11 while the balance sheet under 3 ITA-6576/D/2013 & C.O. No.300/D/2016 consideration was relating to assessment year 2009-10. He stated that both these aspects are discussed by Hon'ble Jurisdictional High Court in paragraph 30 & 31 of their order. He, therefore, stated that the above decision of Hon'ble Jurisdictional High Court would be squarely applicable.
Learned CIT-DR, on the other hand, relied upon the order of learned CIT(A) so far as the question of validity of initiation of proceedings under Section 153C is concerned. He stated that once a document is found for any assessment year, the proceedings under Section 153C need to be initiated for a period of six years. He relied upon the decision of learned CIT(A) on this aspect and stated that proceedings under Section 153C were validly initiated and the same should be upheld.
We have carefully considered the submissions of both the sides and perused the material placed before us. We find that in paragraph 8, learned CIT(A) has recorded the finding “The document found and seized in course of search u/s 132 included audited balance sheet, inclusive of the financial statements of the appellant company for the year ended on 31.03.2009. This document pertains to the Assessment Year 2009-10”. Again, in paragraph 10.2, he discussed these facts and also reproduced the satisfaction recorded by the Assessing Officer of M/s Jagat Projects Ltd. The same is reproduced for ready reference :-
“10.2 As per the satisfaction note recorded by the Assessing Officer, proceedings u/s 153C was taken on the basis of the document found and seized i.e. audit report and financial accounts for the year ended on 31.03.2009 from the searched premises of Jagat group, specifically from the premises of M/s Jagat Agro Commodities Pvt.Ltd. and M/s Jagat Projects Ltd. on 14.09.2010. I have called for the assessment folders in the case of M/s Jagat
4 ITA-6576/D/2013 & C.O. No.300/D/2016
Commodities Pvt.Ltd. and M/s Jagat Projects Ltd., relevant to the assessment year 2011-12, the financial year in which the search took place and perused them. In the file of M/s Jagat Projects Ltd., the Assessing Officer recorded a satisfaction note on 11.02.2013 before transferring the said note to the file of the appellant which is extracted and given below :
“During the course of assessment proceedings in the case of M/s Jagat Agro Commodities Pvt.Ltd. and M/s Jagat Projects Ltd. It was noticed that during search and seizure operation u/s 132 of the I.T. Act, 1961, undertaken on 14.09.2010 in the case of M/s Jagat Agro Commodities Pvt.Ltd. and M/s Jagat Projects Ltd. at 802, Amba Deep Building, K.G. Marg, New Delhi, Audit Report inclusive of financial accounts for the year ended on 31.03.2009 were found and seized by the search party J-5. The seized documents appears at Page No.190 to 206 of Annexure A-9 and belongs to M/s Anush Finlease & Construction Pvt.Ltd.
The case of M/s Anush Finlease & Construction Pvt.Ltd. has been centralized to this Circle vide letter F.No.CIT-I/Centralisation/2011-12/2100 dated 17.11.2011.
I am, therefore, satisfied that the documents, referred to above belong to M/s Anush Finlease & Construction Pvt.Ltd. warranting action u/s 153C in this case.”
Thus, it is not in dispute that the only material on the basis of which proceedings u/s 153C were initiated was the audited balance sheet and financial statements of the assessee for the year ended on 31st March, 2009. That Hon'ble Jurisdictional High Court has considered identical issue in the case of Index Securities Private Limited (supra) and held as under :-
“30. In the present case, the documents seized were the trial balance and balance sheets of the two Assessees for the period 1st April to 13th September 2010 (for ISRPL) and 1st April to 4th September 2010 (for VSIPL). Both sets of documents were seized not from the respective
5 ITA-6576/D/2013 & C.O. No.300/D/2016
Assessees but from the searched person i.e. Jagat Agro Commodities (P) Ltd. In other words, although the said documents might 'pertain' to the Assessees, they did not belong to them. Therefore, one essential jurisdictional requirement to justify the assumption of jurisdiction under Section 153 C of the Act was not met in the case of the two Assessees.
As regards the second jurisdictional requirement viz., that the seized documents must be incriminating and must relate to the AYs whose assessments are sought to be reopened, the decision of the Supreme Court in Commissioner of Income Tax-III, Pune v. Sinhgad Technical Education Society (supra) settles the issue and holds this to be an essential requirement. The decisions of this Court in CIT-7 v. RRJ Securities (2016) 380 ITR 612 (Del) and ARN Infrastructure India Limited v. ACIT [2017] 394 ITR 569 (Del) 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.”
That in paragraph 31 above, their Lordships have pointed out the document must be incriminating and it must relate to the assessment year whose assessments are sought to be reopened. In this case, admittedly, the document was relating to assessment year 2009-10 while the assessment reopened is for 2010-11. Therefore, the requirement that the document should relate to the assessment year sought to be reopened is not fulfilled. Moreover, how the audited balance sheet and financial statements of the assessee are incriminating material has also not been proved. In view of the above, we are of the opinion that on the facts of the assessee’s case, the above decision of Hon'ble Jurisdictional High Court would be squarely
6 ITA-6576/D/2013 & C.O. No.300/D/2016 applicable. Respectfully following the same, we quash the initiation of proceedings u/s 153C and consequentially, the impugned assessment order is also quashed. Once the assessment order itself has been quashed, the Revenue’s appeal does not survive for adjudication.
In the result, the cross-objection of the assessee is allowed and Revenue’s appeal is deemed to be dismissed. Decision pronounced in the open Court on 14.01.2019.