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Facts
A search and seizure operation conducted on third parties led to the initiation of proceedings under Section 153C against the assessee, Vidhya Devi, for AY 2012-13. The Assessing Officer made various additions to her income, which were upheld by the CIT(A). The satisfaction note for initiating Section 153C proceedings referred to only one document, a trust deed of PGP charitable trust, as incriminating material; however, the additions made by the AO were not based on this or any other incriminating material found during the search.
Held
The tribunal held that the assumption of jurisdiction under Section 153C was invalid because the alleged incriminating material in the satisfaction note (a trust deed) did not belong to the assessee nor disclosed any undisclosed income related to her. Consequently, all additions made in the assessment order were deleted as they were not linked to any incriminating material found during the search and seizure operation, as per Supreme Court precedents.
Key Issues
Whether the assumption of jurisdiction u/s 153C is valid when the satisfaction note refers to material not belonging to the assessee or disclosing undisclosed income; and whether additions can be sustained without reference to incriminating material found during a search.
Sections Cited
153C, 132, 143(3), 11, 12
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Income Tax Appellate Tribunal, DELHI BENCH ‘F’, NEW DELHI
Before: SH. SAKTIJIT DEY & SH. M. BALAGANESH
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’, NEW DELHI
BEFORE SH. SAKTIJIT DEY, VICE PRESIDENT AND SH. M. BALAGANESH, ACCOUNTANT MEMBER ITA No.8198/DEL/2018 Assessment Year: 2012-13 Vidhya Devi DCIT C/o M/s. RRA Tax India, D- Vs Central Circle 28, South Extension, Part-I, Noida New Delhi PAN No.ASBPD0089B (APPELLANT) (RESPONDENT) Appellant by Dr. Rakesh Gupta, Advocate Sh. Somil Agarwal, Advocate Sh. Deepesh Garg, Advocate Respondent by Sh. Daya Inder Singh Sidhu, CIT DR Date of hearing: 07/02/2024 Date of Pronouncement: 22/02/2024 ORDER PER SAKTIJIT DEY,VP: This is an appeal by the assessee arising out of order dated 23.10.2018 of learned Commissioner of Income Tax (Appeals) – 4 (for short “CIT(A)”), Kanpur for the assessment year 2012-13.
Though, the assessee has raised multiple grounds both on jurisdictional issue as well as on merits, however, at the very outset we proceed to decide the jurisdictional issue raised in ground No.1, as it goes to the root of the matter.
In ground No.1 the assessee has challenged the validity of assumption of jurisdiction u/s. 153C of the Act and has further challenged the additions on the ground that they are not based on any incriminating material.
Briefly, the facts are, based on a search and seizure operation conducted u/s. 132 of the Act in case of third parties proceeding u/s.153C were initiated in case of the assessee. Ultimately, the Assessing Officer (AO) completed the assessment u/s.153C r.w.s. 143 (3) of the Act making the following additions:-
Total income as per return of Rs.25,48,623/- income/ system Add : Addition / Disallowance on 16,52,931 account of : (1) Addition on account of capital 6,00,000 gain ( As discussed in Para5) (2) Addition on account of 8,78,038 unexplained gift (As discussed in Para6) (3) Addition on account of 1,20,00,000 unexplained jewellery as discussed in para 7 (4) Addition on account of house 5,07,036 hold expenses (para 8) (5) Total income Or Say Rs.63,06,628/-
Assessee challenged the assessment order both on jurisdictional issue as well as on merits. However, learned First Appellate Authority did not find merit in the submissions of the assessee hence, upheld the additions.
Before us, learned Counsel appearing for the assessee submitted that assumption of jurisdiction u/s. 153C of the Act is invalid as the AO has not found any incriminating material belonging to the assessee. Drawing our attention to the satisfaction note, he submitted, the only seized document referred therein is annexure LP-1 is a trust deed of PGP charitable trust. He submitted that except this document no other seized document / incriminating material has been referred to in the satisfaction note. He submitted that the trust deed of PGP charitable trust neither belongs to the assessee nor discloses any undisclosed income of the assessee. He submitted that the AO has recorded his common satisfaction note for all the assessment years and has not identified the assessment year to which the seized material or the undisclosed income relates to. Thus, he submitted that based on such vague satisfaction note proceedings u/s. 153C of the Act could not have been initiated. In support of such contention he relied upon the decision of the Hon’ble Supreme Court in the case of Singhad Technical Society 397 ITR 344.
Without prejudice, he submitted that none of the additions made in the assessment order are with reference to any incriminating / seized material as referred in the satisfaction
note. Again drawing our attention to the satisfaction note, he submitted, the only incriminating material which finds mentioned in the satisfaction note is first deed of PGP charitable trust. Whereas, he submitted, the additions made by the AO are with reference to some other materials, which have not been referred to in the satisfaction note. Thus, he submitted, the additions have not been made with reference to any incriminating material. In support, he relied upon the decision of the Hon’ble Supreme court in the case of Abhisar Buildwell Private Limited 454 ITR 212 held and DCIT Vs. U. K. Paints (Overseas) Ltd. Civil Appeal No. 6634 of 2021.
The learned Departmental Representatives (DR) submitted that based on the satisfaction note the AO has assumed jurisdiction u/s. 153 C of the Act. He submitted that at the time of recording satisfaction the AO has to form a prima facie view that seized material belongs to the assessee. He submitted, the said condition stands satisfied. As regards the issue, whether the additions were made saved on seized material, learned DR submitted that the additions have been made on the basis of incriminating material found in course of search and seizure operation, though, he fairly submitted that in the satisfaction note the AO has not referred to such seized material.
We have considered rival submissions and perused material available on record. The satisfaction note recorded by the AO
while initiating proceedings u/s. 153C of the Act in respect of the assessee reads as under :- Satisfaction Note Name of the Assessee Smt. Vidya Devi PAN ASPPD0889B Under Section 153C of the Act
A search & seizure operation u/s 132 of the IT Act 1961 was carried out in the case of Maccons, Meenu & Yadav Singh Group of cases. During the search proceedings, it transpired that Shri Yadav Singh and his family members are associated with Golf View Hotel. On analysis of financial result of the company M/s Golf Link Hospitality Pvt. Ltd. it is found that the company was incorporated during the F.Y. 2009-10 in which Smt. Vidya Devi and Sh. Devender Gaggal were shareholders.
Later on, during the F.Y. 2010-11, fresh share capital has been introduced in the company at securities premium. Further, unsecured loans amounting to Rs. 1,09,62,682/- and share application money amounting to Rs. 43,65,000/-have also been taken by the company during the F.Y. 2009-10. The said funds have been further utilized in purchase of land admeasuring 533.43 sq. mtrs situated at 14/1, Ambedka Vihar, Chhalera Bangar, Sector-37, Noida for a total purchase consideration mounting to Rs. 64,10,000/- during the F.Y. 2009-10. The assessee company further claimed construction cost aggregating to Rs. 5.18 Cr. approx during the following years.
F.Y. Particulars Amount (Rs.) Remarks 2009-10 Capital work-in 1,09,92,846/- Capitalized in
progress next year 2010-11 Addition of fixed 3,82,45,105/- Capitalized assets 2011-12 Purchase of fresh 57,85,020/- Capitalized land Cost of development- 89,15,516/- Capitalized Addition to fixed assets Capital work in 1,65,02,046/- Not yet progress capitalized 2012-13 Addition to fixed 14,07,324/- Capitalized assets Capital Work in 30,65,225/- Not yet progress capitalized
It has been gathered that the assessee company M/s Golf Link Hospitality Pvt. Ltd. has made investment in purchase of land and construction of hotel building run in the name of 'Golf View' at Noida. The said funds have been sourced from different companies in the form of share capital, share application money and unsecured loans in the form of accommodation entries. The perusal of the balance sheets reveals that this company has ploughed back unaccounted money of Sh. Yadav Singh in the form of share capital, share application money and unsecured loans.
The company M/s Golf Link Hospitality Pvt. Ltd. has raised share application money of Rs. 11 lacs during F.Y. 2009.10 from the assessee Smt. Vidya Devi.
During the course of search operation, Incriminating documents were found and seized in Party No. EW-7 Page No. 19-35 of Annexure- LP-1. From the perusal, it was seen that Vidya Devi is one of the trustee of PGP Charitable Trust which is found to be engaged in non charitable activities and during the year, receive donation of Rs.5,63,71,763/-, which is required to be examined in the view of section 11&12 of the 1.T act 1961.
During the post search investigation it was gathered that one Smt. Vidya Devi substantial shareholder of the company till 2011. Vidya Devi is wife of broth Smt. Kusumlata as accepted by Sh. Yadav Singh and various documents in the of Vidya Devi were found and seized from house of Yadav singh. Smt. Kusumlata herself has accepted "that she often visits assessee's residence being family member/close relative and also discusses her financial planning with her husband being a widow", It is also seen from the bank statement of Smt. Vidya Devi that Sh. Mohan Rathi, the auditor of Sh. Yadav singh, Golf link hospitality Pvt. Ltd and Smt. Kusumlata has withdrawn huge cash from the account of Vidya Devi after search and seizure action.
Therefore, it is established beyond doubt that Sh. Yadav singh and her family are associated with Hotel golf view through Smt. Vidya Devi. During the course of post search proceedings, the assessee vide summon has been asked to provide audited financial results of the company along with shareholding pattern, details of unsecured loans.
The cases of this group are interconnected and required deep investigation to arrive at a logical conclusion. As such for taking a logical conclusion in this group of case every single seized document
and entry appearing in the seized documents requir deep scrutiny and has its impact on the other cases of the group.
Considering the above facts, I am satisfied that it is a fit case for initiatic proceedings u/s 153C of IT Act for proper deep investigation and to plug the la revenue.
On careful reading of satisfaction note it becomes very much clear that only incriminating material referred there-in is “ Party No. EW-7 Page No.19-35 of Annexure –LP-1”.
As demonstrated before us by learned Counsel for the assessee, the said incriminating material is the trust deed of PGP charitable trust, wherein, assessee is one of the trustees. Except the aforesaid document, the AO has not referred to any other seized material in the satisfaction note. Admittedly, in the assessment order the AO has not made any addition with reference to seized material annexure –LP-1. In fact, said seized material does not disclose any unaccounted/ undisclosed income of the assessee. Therefore, in our view, assumption of jurisdiction u/s. 153C of the Act based on such document is invalid.
Even, otherwise also, now it is fairly well settled that in case of unabated assessment no addition can be made in absence of incriminating material found during the search and seizure operation. As discussed earlier, the only incriminating material referred to in the satisfaction note is the trust deed of PGP
charitable trust. Though, in the assessment order the AO has made a number of additions, however, none of them are with reference to the incriminating material referred to in the satisfaction note. Whereas, the additions are based on some other material. Thus, in our considered view, the ratio laid down by the Hon’ble supreme Court in the case of Abhisar Buildwell (supra) squarely applies to the facts of the present case. Therefore, considering the totality of facts and circumstances of the case, we hold that not only the assumption of jurisdiction u/s. 153C of the Act is invalid, but, the additions made are unsustainable as they are not with reference to any incriminating material. Accordingly, we delete the additions.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 22.02.2024.
Sd/- Sd/- (M. BALAGANESH) (SAKTIJIT DEY) ACCOUNTANT MEMBER VICE PRESIDENT *NEHA*/NV Date:- 22.02.2024