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Income Tax Appellate Tribunal, DELHI BENCH ‘E’ : NEW DELHI
Before: SHRI N.K. SAINI & SHRI KULDIP SINGH
PER KULDIP SINGH, JUDICIAL MEMBER :
The appellant, Income-tax Officer, Ward 13 (1), New Delhi (hereinafter referred to as ‘the Revenue’) by filing the present appeal, sought to set aside the impugned order dated 01.08.2014 passed by Ld. CIT (Appeals)-XII, New Delhi qua the assessment year 2006-07 on the grounds inter alia that :-
“1. On the facts and under the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition made u/s 68 of the Act on account of unexplained cash credit amounting to Rs.4,66,00,000/- by ignoring the fact that the assessee has been attempting to pass off these transactions as genuine. It is quite possible that the assessee could have succeeded in its design but for the search in the case of the Jain Brothers where complete evidence or colorable mechanism used by the assessee has been seized. The documents are self speaking and are given graphic picture of the modus operandi adopted by the parties involved. It is quite disturbing to note the ease with which the assessee has been conducting its affairs transforming its unaccounted money into regular transactions. It needs to be emphasized here that these transactions have not taken place in a period of one or two months but are spread over a period of 43 months for different entities of the Today Group running into approximately more than 1000 individual transactions. The law allows the Assessing Officer to lift the corporate veil to unmask the real from the apparent and also to go behind the transaction to understand their true import. The law also allows the authorities to test the transactions on a touches tone of human probability to arrive at a conclusion which the rationale mind would arrive at. After going behind the transactions on paper and after lifting the corporate veil, as in earlier paragraphs, it has been proved that the apparent was not real.
On the facts and under the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition made u/s 68 of the Act on account of undisclosed income of Rs.4,66,00,000/- by ignoring the clear judicial pronouncements in the cases of CIT vs. Nipun Builders and Developers [2013] 350 ITR 407 (Del), CIT vs. Nova Promoters and Finlease Pvt. Ltd. [2012] 342 ITR 169 (Del), and Delhi High Court order dated 22.11.2013 in the case of CIT vs. N R Portfolio Pvt. Ltd. The appellant craves to be allowed to add any fresh grounds of appeal and/or delete or amend any of the grounds of appeal.”
2. Briefly stated the facts necessary for adjudication of the controversy at hand are : The assessee is into the real estate and hospitality business activities in NCR and other parts of the country since 2004. During the search and seizure operation conducted at the premises of M/s. Today Homes and Infrastructure Pvt. Ltd. and its group concerns on 26.11.2009 concluded on 25.01.2010, certain books of account/documents pertaining to assessee company were found and seized, sufficient to initiate proceedings under section 153 of the Income-tax Act, 1961 (for short ‘the Act’). Assessing Officer after recording satisfaction initiated proceedings by way of issuance of notice u/s 153A and 153C directed the assessee to file the return within 15 days from the service of notice which was duly served. Assessee opted to get the original return of income filed on 31.05.2006 declaring loss of Rs.4,11,906/- as reply to the notice. The notices u/s 143(2) and 142 (1) were issued along with detailed questionnaire. AO found credited an amount of Rs.4,66,00,000/- in the books of account of the assessee with immediate source of this amount from M/s. BJ Buildwell Pvt. Ltd.. But, thereafter, same has been shown to be sourced from different entity, M/s. Jain Brothers. Assessee has admitted to pass all these transactions as genuine. AO declining the contentions raised by the assessee proceeded to lift the corporate veil to unmask the real from the apparent by going behind the transactions and concluded that the assessee has failed to prove the genuineness of the transactions of Rs.4,66,00,000/- within the meaning of section 68 of the Act and made addition thereof to the total income of the assessee.
3. Assessee carried the matter by way of appeal before the ld. CIT (A) who has deleted the addition by allowing the appeal.
Feeling aggrieved, the Revenue has come up before the Tribunal by way of filing the present appeal.
We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
Undisputedly, proceedings u/s 153C were initiated on the basis of documents seized during the search and seizure operation conducted on 26.11.2009. It is also not in dispute that the assessee has opted to treat his return of income filed on 31.05.2006 as its reply to the notice. 6. It is also not in dispute that the AO has made detailed discussion in the assessment order as to the existence of shell companies controlled by Gambhirs and Jain Brothers. It is also not in dispute that it is the case of the assessee that assessee has received an amount of Rs.4,66,00,000/- from M/s. BJ Buildwell Pvt. Ltd. during FY 2005-06 relevant to AY 2006-07. 7. It is also not in dispute that the AO in his satisfaction note dated 06.06.2011 relied upon one Agreement to Sell dated 05.05.2016 for Rs.5,01,51,000/- only entered into between UTI and Nahind Finlease Pvt. Ltd. for office space no.A-1601 and B-1601 at 16th Floor of Statesman House, Barakhamba Road, New Delhi in order to initiate the proceedings u/s 153C. For ready perusal, satisfaction note, available at page 55 of the paper book, is extracted as under :-
“M/s. Nahid Finlease Pvt Ltd (PAN- AABCN5146L) A search and seizure operation was carried at the business premises as well as the residential premises of Today group of cases on 26. 11. 2009 and was finally concluded on 25.01. 2010. During the course of search and seizure operation at the various premises of Today group of cases following documents belonging to M/s Nahid Finlease Pvt. Ltd. were found and seized: Premises : 16th Floor, Statesman House, Barakhamba Road, N. Delhi (PARTY-H-3) Party – H-3, annexure A-2 : Page Description No. 35 – 50 Agreement for sale dated 05-05-06 for Rs.5,01,51,000/- between UTI and Nahid Finlease Pvt. Ltd. for office space Nos.A-1601 and B-1601 at 16th floor of statesman house Barakhamba Road New Delhi.
In view of above, it is established beyond doubt that many books of accounts or documents seized during the course of search and seizure action on Today group of cases belong to M/s Nahid Finlease Pvt. Ltd. i.e. the assessee company and hence prerequisite condition to initiate proceedings "u/s 153C of the Income Tax Act, 1961 are issued for AY 2004-05 to 2009-10 in the case of M/s. Nahid Finlease Pvt. Ltd. i.e. the assessee company.
Ld. DR for the Revenue challenging the impugned order relied upon the assessment order and contended that the assessee has failed to prove the genuineness of the amount received form M/s. BJ Buildwell Pvt. Ltd..
On the other hand, ld. AR for the assessee supporting the impugned order passed by the ld. CIT (A) contended inter alia that the satisfaction note, available at page 55 of the paper book, apparently shows that no incriminating document belonging to assessee was found during the search operation except the Agreement to Sell dated 05.05.2006 for a consideration of Rs.5,01,51,000/- between UTI Limited and the assessee company for office space no.A-1601 and B-1601 at 16th Floor of Statesman House, Barakhamba Road, New Delhi; that incriminating material referred to in the satisfaction note does not pertain to the assessment year in question and relied upon the decision rendered by Hon’ble Supreme Court in CIT vs. Sinhgad Technical Education Society – (2017) 397 ITR 344 (SC).
When we examine the assessment order particularly para 1.5 (J) at page 54, the AO has based the entire addition on the ground that the amount of Rs.4,66,00,000/- has been found credited in the books of account of the assessee and the immediate source of this amount has been found to be from M/s. BJ Buildwell Pvt. Ltd. Thereafter, the amount has been shown to be sourced from different entities of Jain Brothers and as such failed to pass the test of genuineness of the transactions u/s 68 of the Act.
First of all, the addition has not been made on the basis of satisfaction note (supra) wherein incriminating material is “Agreement to Sell” dated 05.05.2006 for Rs.5,01,51,000/- between UTI Limited and Nahind Finlease and there is no reference to any alleged transactions between assessee and BJ Buildwell Pvt. Ltd.. Ld. CIT (A) deleted the addition on the ground that the documents on the basis of which proceedings u/s 153C were initiated have already been disclosed by the assessee before AO vide submission dated 14.11.2011, available at pages 73 to 93 of the paper book.
Assessee brought on record, vide letter dated 14.11.2011, documents, viz., (i) complete address & PAN of BJ Buildwell Pvt. Ltd.; (ii) confirmation signed by BJ Buildwell Pvt. Ltd.; and (iii) copy of the bank statement of BJ Buildwell Pvt. Ltd. reflecting the source of funds; and also vide letter dated 19.12.2011, the assessee brought on record the following the documents :-
(i) Memorandum & Articles of Association of BJ Buildwell Pvt. Ltd.;
(ii) Copy of Master Data from the ROC site of BJ Buildwell Pvt. Ltd.;
(iii) Copy of ITR and audited financial of BJ Buildwell Pvt. Ltd. for the financial year ending 31.03.2006.
When all the documents have already been brought on record by the assessee during assessment proceedings in the completed assessment, the addition made by the AO u/s 153C is outside the scope of proceedings. So, the ld. CIT (A) has rightly deleted the addition on legal ground.
Even, on merits, when the assessee has brought on record complete identity with PAN, confirmation, bank statements, memorandum of article and audited financials of BJ Buildwell Pvt. Ltd. to substantiate the genuineness of the transactions, the AO cannot make addition on the basis of surmises that funds received by the assessee from BJ Buildwell Pvt. Ltd. were in fact has been received from Jain Brothers.
In any case, the AO was not satisfied with the transactions explained by the assessee, the said amount is required to be assessed in the hands of BJ Buildwell Pvt. Ltd.. Even otherwise, for arguments sake, even if it is assumed that addition is to be made on the basis of satisfaction note, which is not recorded on the basis of any incriminating material nor it pertains to the year under assessment, qua amount received by virtue of the Agreement to Sell dated 05.05.2006, the addition on the basis of which can only be made in the relevant assessment year and not in the year under assessment.
Hon’ble Apex Court in CIT vs. Sinhgad Technical 16. Education Society (supra) while deciding the identical issue pertaining to section 153C held as under :-
“Search and Seizure – Assessment of third person – Satisfaction note – Incriminating material seized must pertain to assessment years in question – Material on which satisfaction based pertaining to assessment year 2004-05 or thereafter – notice for assessment years 2000-01 to 2003-04 not sustainable – Income-tax Act, 1961, s. 153C.”
15. On the basis of similar satisfaction note dated 06.06.2011 addition was made in assessee’s own case for AYS 2007-08 TO 2009-10 by initiating the proceedings u/s 153C which was also deleted by the ld. CIT (A) and the said order has been upheld by the coordinate Bench of the Tribunal in to 4824/Del/2014 order dated 22.01.2018 by returning following findings :-
“15. Considering the facts of the case, in the light of the above decisions, it is clear that in terms of section 153C of the Act, the AO should be satisfied that any money, bullion, jewellery or other valuable articles or things or books of accounts or documents seized or requisition belong or belongs to a person other than the person referred to in section 153A of the Act and he shall hand over the seized documents to the AO having jurisdiction over that person. Therefore, the satisfaction of the AO before initiating proceedings u/s 153C is must that the seized documents which are incriminating in nature belong or belongs to the assessee so as to proceed u/s 153C of the Act. The copy of the satisfaction note recorded by the AO u/s 153C is filed at page 71 of the Paper Book. In this satisfaction note, the AO has referred to the seized annexures/documents which is agreement for sale dated 05.05.2006 for Rs.5,01,51,000/- between UTI and the assessee company for purchase of office space in property located at 16th Floor, Statesman House, Barakhamba Road, New Delhi. The AO on the basis of this seized documents satisfied himself that there is an escapement of income, however, the property in question have already been disclosed by the assessee in the regular books of accounts and to the Revenue Department. The property is taken in the schedule of fixed assets in the balance sheet of the assessee. Copy of which is filed at page 67 of the Paper Book. The AO in the assessment order in para 2 has mentioned the same fact that the property in question has been purchased by the assessee from M/s UTI Ltd. on 05.05.2006 in AY 2007-08. The AO did not make any addition on account of purchase of the property treating undisclosed income. The AO mentioned in the assessment order that books of accounts or documents belong to the assessee were found and seized during search. When the property was purchased by the assessee through agreement to sale dated 05.05.2006 has already been disclosed in the regular books of account, therefore, the same could not be treated as undisclosed income of the assessee or incriminating material in nature against the assessee. The AO in the assessment order did not question the aforesaid seized document i.e agreement to sale for the purpose of making any addition against the assessee. It was clear that the reasons assigned by the AO in the satisfaction note were silent about any incriminating information or unaccounted or undisclosed hidden, income, seized by the Revenue from the assessee. The reasons recorded by the AO in the satisfaction note are factually incorrect or without sustenance because the property in question purchased on 05.05.2006 was already disclosed in the regular books of accounts for AY 2007-08. Therefore, there is no question of AO being satisfied with conditions of section 153C of the Act so as to initiate proceedings u/s 153C of the Act against the assessee. The satisfaction has also not recorded in case of person searched as per law because it is recorded in case of assessee only. It is, therefore, bad in law. Ld.CIT(A), therefore, has rightly appreciated the material on record and correctly held that the addition has been made without reference to any material, found during the course of search, therefore, it is clearly beyond the scope of the proceedings u/s 153C of the Act because the annul letting value was determined in assessment year without reference to any incriminating material found during the course of search. The AO merely on presumption assumed that the assessee has let out entire office space of M/s Today Hotels Pvt. Ltd. The issue is, therefore, covered in favour of the assessee by the judgement of Hon’ble Supreme Court in the case of Sinhgad Technical Education Society (supra) because there is no incriminating material found during the course of search so as to make the above addition in the assessment order.”
In view of what has been discussed above, finding no illegality or perversity in the impugned order passed by ld. CIT (A), present appeal filed by the Revenue is hereby dismissed. Order pronounced in open court on this 22nd day of June, 2018.