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Income Tax Appellate Tribunal, DELHI BENCH “C”, NEW DELHI
Before: SHRI P. M. JAGTAP & MS. SUCHITRA KAMBLE
Assessee by : Shri Salil Agarwal, Adv. Shri Shailesh Gupta, Adv. : Mrs. Meeta Singh, CIT-DR Department by Date of hearing : 09-07-2018 Date of pronouncement : 13-07-2018 O R D E R
PER P. M. JAGTAP, AM :
This appeal filed by the assessee is directed against the order of the ld. CIT(A)- II, New Delhi dated 14.07.2014.
The relevant facts of the case giving rise to this appeal are as follows. The assessee is a company which is carrying on the business as builders and colonizers. The return of income for the year under consideration was filed by it originally u/s 139 declaring loss of Rs.17,21,872/-. A search and seizure action u/s 132 was conducted in Tinna Group of cases on 11.11.2010. During the course of said action, certain documents belonging to the assessee company were found. A notice u/s 153C accordingly was issued by the Assessing Officer on 19.11.2012 in reply to which a letter was filed by the assessee on 12.02.2013 stating that the return originally filed by it u/s 139 may be treated as the return filed in response to notice u/s 153C of the I.T. Act, 1961. As noticed by the Assessing Officer, the assessee had purchased a land measuring 14 Bighas and 11 Biswa vide Agreement dated 31.11.2009 for Rs.9,00,000/- at Village Rojka Gujar, District- Sohna, Haryana and the same was subsequently sold on 17.02.2010 for Rs.40,92,187/-. Since the capital gain arising from the said sale was not disclosed by the assessee in the return of income filed for the year under consideration, the assessee was required by the Assessing Officer to offer its explanation in this regard. In reply, it was submitted by the assessee that the land at Village Rojka Gujar, District- Sohna, Haryana was not a capital asset as it was an agricultural land situated 8 kilometers away from the municipal limits of Gurgaon Municipal Corporation. A certificate dated 12.03.2010 to this effect issued by the Tehsildar, Sohna (Haryana) was relied upon by the assessee to support and substantiate its case. On perusal of the relevant sale deed, the Assessing Officer, however, noticed that the nature and quality of land sold by the assessee was described as “Gair Mumkin Pahar” to show that the said land was rocky. He also found that the type of the said land was mentioned in the land revenue records as “Kadimi Bajzar” to show that it was a barren land. He also made enquiry with certain competent authorities which revealed that no activities such as plantation or grazing of animals were permissible on the said land. In this regard, reliance was placed by the Assessing Officer on Circular No.S.O.33/P.A.-2/1900/S.4/70 dated 11.02.1970 issued by the Forests and Animal Husbandry Department, Government of Haryana. He also relied on the letter dated 16.03.2011 issued by Tehsildar, Sohna informing that the land at Village Rojka Gujar, District- Sohna, Haryana was a barren land and as per the records, no crops were grown on it. After discussing elaborately these documentary evidences as well as other information collected by him, the Assessing Officer held that the land owned by the assessee at Village Rojka Gujar, District- Sohna, Haryana was a barren and rocky terrain, which was not cultivable and no plantation activities were also permissible on the said land.
He held that the said land thus was not an agricultural land and irrespective of the distance from the concerned municipal corporation limits, it was a capital asset within the meaning of definition of section 2(14) of the Act. He accordingly worked out the capital gain arising from sale of the said land at Rs.31,92,187/- and brought the same to tax in the hands of the assessee in the assessment completed u/s 153C/143(3) vide order dated 28.03.2013.
Against the order passed by the Assessing Officer u/s 153C/143(3), an appeal was preferred by the assessee before the ld. CIT(A). A detailed submission was made on behalf of the assessee before the ld. CIT(A) in support of its case that the land at Village Rojka Gujar, District- Sohna, Haryana was an agricultural land situated outside 8 kilometers from the municipal limits of Gurgaon Municipal Corporation and the same was not being a “capital asset”, profit on sale of the same was not chargeable to tax. After considering and discussing the said submissions made by the assessee, the ld. CIT(A) summarized his conclusion in paragraph 7.18 of his impugned order which reads as under :-
“7.18. Thus in view of the discussion above, the orders of the Commissioner, Gurgaon Division and the Divisional Commissioner, Gurgaon establish beyond doubt that no agricultural operations could have been performed on the lands at village Rojka Gujar where ownership was joint and not identifiable and the soil was rocky and barren. They also reveal that fraud was committed and interpolations were made by the local revenue officers in the record of rights. Hence, the documents of Jama Bandi and Girdwari, cited by the appellant, were not reliable pieces of evidence. The authorities also noted that the fraud had led to subsequent acts, such as mutation, which too had to be 'deleted'. Hence, no credence can be placed on the mutation deed filed by the appellant. In the absence of feasibility of agricultural operations on the lands at village Rojka Gujar, the appellant could not have derived agricultural income. Since the lands in question were not agricultural, it constituted a capital asset and the surplus arising on account of its sale was correctly subjected to capital gains tax by the AO at Rs 31,92,187. As a result, grounds 1 to 7 of the appeal are dismissed. Appeal against the initiation of penalty proceedings is premature and hence ground 8 of the appeal is also dismissed.”
Ld. CIT(A) thus did not find merit in the submission made by the assessee and confirmed the addition of Rs.31,92,187/- made by the Assessing Officer to the total income of the assessee on account of capital gain.
Aggrieved by the order of the ld. CIT(A), the assessee has preferred this appeal before the Tribunal.
In addition to the grounds originally raised by the assessee in this appeal disputing the addition of Rs.31,92,187/- made by the Assessing Officer and confirmed by the ld. CIT(A) on account of capital gain, the assessee has filed an application seeking admission of the following additional ground :- “That the assessment order passed by learned assessing officer is without jurisdiction and void ab-initio and is liable to be quashed, as proceedings initiated under section 153C of the Act are without satisfying the statutory conditions envisaged under the Act and are thus, without jurisdiction.”
Since the issue raised by the assessee in the additional ground is purely a legal issue and all the material facts necessary for adjudication of the same are available on record, we have admitted the same. Even the ld. DR has not raised any objection in this regard. Since the preliminarily issue relating to the validity of initiation of proceedings u/s 153C is raised by the assessee in the additional ground, we proceed to take up the same first for consideration and decision.
Ld. counsel for the assessee submitted that although the return of income for the year under consideration was regularly filed by the assessee u/s 139, no notice u/s 143(2) was issued by the Assessing Officer and even the period available for issue of such notice had expired by the time the satisfaction came to be recorded by the Assessing Officer and notice u/s 153C was issued to the assessee. He invited our attention to the satisfaction note placed at page 12E of his Paper Book and pointed out that the following two documents found and seized during the course of search were referred to and relied upon by the Assessing Officer to initiate the proceedings u/s 153C in the case of the assessee :-
(i) Document seized as per party no. R-1, 17 – copy of current account with Syndicate Bank. (ii) Document seized as per party no. R-3, A-1, 58 – details of property at Village Satvari Chattarpur.
Ld. counsel for the assessee contended that the first seized document was a copy of current account of the assessee company with Syndicate Bank and since the said account was duly disclosed by the assessee company in its return of income, the same was not in the nature of incriminating document. He contended that the other seized document contained the details of property owned by the group companies including the assessee company and since the property mentioned therein was duly disclosed by the assessee company, the said document also was not in the nature of any incriminating document. He invited our attention to the copy of the said seized documents placed at page 12G and 12H of his Paper Book and contended that the property of the assessee at Village Rojka Gujar, District- Sohna, Haryana sold during the year under consideration did not find any mention in the said document. He contended that there was thus nothing incriminating in both the seized documents relied upon by the Assessing Officer for initiating the proceedings u/s 153C and even in the assessment completed u/s 153C/143(3), the Assessing Officer has neither referred to nor relied upon any of these two documents. He contended that these two seized documents relied upon by the Assessing Officer to initiate the proceedings u/s 153C may be belonging to the assessee but the same having no bearing on the determination of the total income of the assessee, these documents were not sufficient to validly initiate the proceedings u/s 153C in the case of the assessee. In support of this contention, he relied on the provisions of sub-section (1) of section 153C as well as the following judicial pronouncement :-
(i) CIT vs. Veerprabhu Marketing Ltd., 388 ITR 574 (Calcutta). (ii) CIT vs. RRJ Securities Ltd., 380 ITR 612 (Delhi). (iii) CIT vs. Singhad Technical Education Society, 397 ITR 344 (SC). (iv) Pr.CIT vs. Index Securities (P.) Ltd., 86 taxmann.com 84 (Delhi).
Ld. DR, on the other hand, contended that only requirement for initiating the proceedings u/s 153C in the case of a person other than the person referred to in section 153A as per section 153C(1) is that the books of account or documents or assets seized or requisitioned are belonging to such person. She contended that as per specific provision contained in section 153C(1), there is no requirement that such books of account or documents are in the nature of incriminating documents and the contention of the ld. counsel for the assessee based on such requirement is not tenable in view of specific provision contained in section 153C(1) of the I.T. Act. She invited our attention to the relevant portion of the assessment order to show that the addition made by the Assessing Officer on account of capital gain was based on the seized material although the same was not specifically mentioned in the satisfaction note. She contended that the capital gain arising from the sale of its land during the year under consideration was claimed to be exempt by the assessee on the ground that the same was not a capital asset. She contended that this claim of the assessee, however, was found wrong by the Assessing Officer on the basis of material found and seized during the course of search as well as further enquiry made by him during the course of assessment proceedings and the assessment made by the Assessing Officer u/s 153C by bringing to tax the capital gain arising from the sale of the said land was in accordance with the relevant provisions of law including section 153C of the I.T. Act. She again reiterated that the requirement of section 153C to initiate the proceedings u/s 153C is specific and limited and the word “incriminating” cannot be read into while interpreting the plain, simple and clear provisions of section 153C as sought by the ld. counsel for the assessee.
We have considered the rival submissions and also perused the relevant material available on record. It is observed that a search and seizure action u/s 132 was conducted in Tinna Group of cases on 11.11.2010 and after being satisfied that certain documents found during the course of the said search were belonging to the assessee, proceedings u/s 153C were initiated by the Assessing Officer in the case of the assessee on 16.11.2012. As explained by the ld. counsel for the assessee, the period available for issue of notice u/s 143(2) by that time had expired and the assessment for the year under consideration in the case of the assessee having filed his return of income u/s 139 was finalized leaving a limited scope of assessment u/s 153C of the Act.
A copy of satisfaction note recorded by the Assessing Officer on 16.11.2012 is placed on record by the ld. counsel for the assessee at page 12E of the Paper Book and perusal of the same clearly shows that the two seized documents were relied upon by the Assessing Officer to initiate the proceedings u/s 153C in the case of the assessee. The first seized document relied upon by the Assessing Officer was a copy of the current account of the assessee with Syndicate Bank and as submitted by the ld. counsel for the assessee, the said account was duly disclosed by the assessee in his return of income filed originally u/s 139. The second seized document contained certain details of the properties owned by the different group companies including the property owned by the assessee company at Village- Satbari, Mehrauli, New Delhi. The copies of both these seized documents are placed on record by the ld. counsel for the assessee at page no.12E to 12H of the Paper Book and as rightly contended by him, there is nothing incriminating that is found recorded in these documents. Even the ld. DR has not been able to contravent this position. She, however, has contended by relying on the provisions of sub-section (1) of section 153C that only requirement for initiating proceedings u/s 153C in the case of person other than the person referred to section 153A is that the documents seized belong to such person and the word “incriminating” cannot be read into the provisions of “section 153C” as sought by the ld. counsel for the assessee.
In the case of CIT vs. RRJ Securities Ltd. (supra) cited by the ld. counsel for the assessee, a similar issue had arisen for consideration before the Hon’ble Delhi High Court. In the said case, the records slip found during the course of search conducted in the case of other person was undisputedly belonging to the assessee, but the question that arose for consideration before the Hon’ble Delhi High Court was whether the Assessing Officer of the assessee was justified in taking further steps for reassessing the income of the assessee in respect of the assessment years for which assessments were concluded and in respect of which the seized documents had not bearing. It was held by the Hon’ble Delhi High Court that the same would be clearly impermissible as the seized material now available with the Assessing Officer had no nexus with those assessments and was wholly irrelevant for the purpose of assessing the income of the assessee for the years in question. Explaining further, it was observed by their Lordships that merely because for document belonging to the assessee is found from the possession of a person searched u/s 132 of the Act, it does not mean that the concluded assessments of the assessee are necessarily to be reopened u/s 153C of the Act. It was held that the concluded assessment cannot be interfered with mechanically and solely for the reason that a document belonging to the assessee, which has no bearing on the assessments of the assessee for the years preceding the search, was seized from the possession of searched persons. It was held that when the documents seized had no relevance or bearing on the income of the assessee for the relevant assessment years and could not possibly reflect any undisclosed income, no investigation was necessary and the provisions of section 153C, which are to enable an investigation in respect of the seized asset, could not be resorted to.
By relying on the provisions of section 153C(1) as applicable in the present case, ld. DR has contended that the limited requirement for initiating proceedings u/s 153C in case of a person other than the person referred to in section 153A is only that the Assessing Officer was satisfied that the books of account or documents seized belong to such person and such documents are handed over by him to the Assessing Officer having jurisdiction over such other person. The relevant provisions of section 153C(1) as prevalent at the relevant time read as under :-
“Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, when the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person.”
The provisions of section 153C as extracted above have been subsequently amended by the Finance Act, 2015 w.e.f. 01.06.2015 and the provisions so amended read as under :-
Assessment of income of any other person.
153C. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,— (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person [for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and] for the relevant assessment year or years referred to in sub-section (1) of section 153A : Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person : Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made [and for the relevant assessment year or years as referred to in sub-section (1) of section 153A] except in cases where any assessment or reassessment has abated.”
A comparative reading of the pre-amended and amended provisions of section 153C clearly shows that the requirement to initiate proceedings u/s 153C in case of a person other than the person referred to in section 153A as per the pre-amended provisions was only that the books of account or documents seized belong to such person and the same are handed over to the Assessing Officer having jurisdiction over such other person. The amended provisions of section 153A, however, have made a material change in this requirement inasmuch as in addition to the satisfaction of the Assessing Officer having jurisdiction over a searched person about any books of account or documents seized being pertained to any other person or any information contained therein being related to such person and handing over of such books of account or documents seized to the Assessing Officer having jurisdiction over such other person, there is an additional requirement that the Assessing Officer having jurisdiction over such other person shall proceed against such other person in accordance with the provisions of section 153A only if he is satisfied that the books of account or documents seized have a bearing on the determination of the total income of such other person.
It is relevant to note here that in the case of RRJ Securities Ltd. (supra) cited by the ld. counsel for the assessee and discussed on detail in the forgoing portion of this order, the assessment years involved were 2003-04 to 2008-09 and the notices u/s 153C were issued to the assessee on 08.09.2010 and while deciding the issue relating to the validity of initiation of proceedings u/s 153C, the Hon’ble Delhi High Court after taking note of the amendment made in the provisions of section 153C w.e.f. 01.06.2015 held that if the documents seized belonging to the assessee had no relevance and bearing on the income of the assessee for the relevant assessment years and could not possibly reflect any undisclosed income, the provisions of section 153C could not be resorted to and the Assessing Officer had no jurisdiction to make reassessment u/s 153C of the Act.
In the case of Pr.CIT vs. Index Securities (P.) Ltd., 86 taxmann.com 84 cited by the ld. counsel for the assessee, a similar issue relating to validity of jurisdiction assumed by the Assessing Officer u/s 153C had come up for consideration before the Hon’ble Delhi High Court and it was held that by their Lordships by relying on the decision of the Hon’ble Supreme Court in the case of Sinhgad Technical Education Society (supra) as well as their own decision in the case of RRJ Securities (supra) and ARN Infrastructure India Ltd. vs. CIT, 394 ITR 569 that in order to justify the assumption of jurisdiction u/s 153C of the Act, the documents seized must be incriminating. In the said case, it was contended like in the present case on behalf of the Revenue that the requirement of having incriminating material found during the course of search was to be met only during the assessment and not for initiation of proceedings u/s 153C.
The Hon’ble Delhi High Court, however, found this contention raised on behalf of the Revenue to be futile by observing that the satisfaction note forms the basis of initiating the proceedings u/s 153C of the Act. In the said case, two seized documents were referred to in the satisfaction note and since the Assessing Officer had finalized the assessment without making any addition on the basis of the said documents, it was held by the Hon’ble Delhi High Court that the said documents could not be said to be incriminating and consequently the essential requirement for assumption of jurisdiction u/s 153C was not met.
It is pertinent to note here that the assessment years involved in the case of Index Securities (P.) Ltd. (supra) were 2007-08 to 2011-12 and the notices u/s 153C were issued on 13.02.2013.
As already discussed, both the seized documents belonging to the assessee in the present case as relied upon by the Assessing Officer in the satisfaction note were not having any bearing on the determination of the income of the assessee for the year under consideration. As a matter of fact, not only no addition on the basis of the said documents was made by the Assessing Officer in the assessment completed u/s 153C/143(3), but even there was no reference whatsoever to the said documents in the said assessment. If this undisputed factual position is considered in the light of the ratio laid down by the Hon’ble Delhi High Court in the case of CIT vs. RRJ Securities Ltd. (supra) and Pr.CIT vs. Index Securities (P.) Ltd. (supra), we find merit in the contention of the ld. counsel for the assessee that the jurisdictional requirement for initiating proceedings u/s 153C in the case of the assessee was not satisfied.
The initiation of proceedings u/s 153C in the case of the assessee thus was bad in law and the assessment made by the Assessing Officer u/s 153C/143(3) in pursuance thereof is liable to be cancelled being invalid. We order accordingly and allow the additional ground raised by the assessee.
As a result of decision rendered by us on the preliminarily issue raised by the assessee in the additional ground cancelling the assessment made by the Assessing Officer u/s 153C/143(3), all the grounds originally raised by the assessee in this appeal disputing the addition made therein on account of capital gain on merit have become infructuous and we do not deem it necessary or expedient to decide the same.
In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on this 13th day of July, 2018.