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Income Tax Appellate Tribunal, “C” BENCH: KOLKATA
Per Shri A.T.Varkey, JM These are appeals filed by the assessee company against the order of the CIT(A) – 3, Kolkata dated 30.08.2013 for Assessment Years 2007-08 and 2008-09. Since common facts and common grounds of appeal are involved in both the appeals, these were taken up for hearing together and accordingly are disposed of by this common order. Ground no 1 to 3 of both the appeals, the appellant company has objected to the validity of the proceedings and consequent order u/s 153C/143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’) by the A.O.
Briefly stated the facts of the cases are that the search and seizure operation of the Act u/s 143(3) of the Act was conducted on 13.02.2010 against Naresh Kumar Group (hereinafter ‘NKG’). In the course of search documents marked as AVR-2 and AVR-5 were found and seized from the possession of Shri Ashok Verma, Vice President of M/s. Naresh Kumar & Co. In his statement recorded under section 132(4) of the Act, Shri Verma admitted that entries recorded on pages 35 and 38 of AVR-2 pertained to M/s. Tycoons Industries Pvt. Ltd. i.e. the appellant company herein. In the entry recorded in his order sheet on 12.07.2011, the A.O. noted that in the course of search certain incriminating
ITA Nos. 2467 & 2468 A.Ys. 2007-08 & 2008-09 Tycoons Industries Pvt. Ltd.
documents including bills, vouchers relating to M/s. Tycoons Industries Pvt. Ltd. were found and seized. Later at the time of verification of such document, it was ascertained that documents marked as AVR-2 pages 1 to 24, 35 to 39 and AVR-5 pages 9 to 15 belonged to M/s. Tycoons Industries Pvt. Ltd. of 11, British Indian Street, Kolkata – 700 069. Accordingly, the A.O. recorded his satisfaction in terms of section 153C of the Act and issued notices for assessment of six years. Pursuant to such notices, the A.O. passed the order under section 153C / 143(3) dated 28.12.2011 wherein he assessed the unaccounted commission income of Rs. 1,70,000/- and Rs. 1,82,000/- in the assessment year 2007-08 and 2008-09 respectively. Aggrieved by the said orders, appeals were filed before the Ld. CIT(A), Central-III, Kolkata who vide his order dated 13.02.2013 dismissed both the appeals and upheld the validity of the proceedings as well as the order u/s 153C on the ground that the documents seized belonged to the appellant company. Aggrieved by such orders, the appellant company is now before us.
We have heard both the parties and perused the material on record and has gone through the judicial precedents relied upon by both the parties. The learned AR appearing for the assessee primarily assailed the validity of the proceedings u/s 153C on the ground that the seized incriminating documents bearing identification marked as AVR-2 and AVR- 5 do not belong to the appellant company. Drawing attention to para 2.5 of the impugned order of the Ld. CIT(A), the learned AR pointed out that the Ld. CIT(A) has reproduced pages 35 and 38 of AVR-2 wherein certain notings appeared in respect of payments made to various persons. According to the Ld. CIT(A), the notings on pages 35 and 38 suggested that abbreviations ‘TIPL’ on these pages represented the appellant i.e. Tycoons Industries Pvt. Ltd. The Ld. CIT(A) also referred to seized documents AVR-2 pages 15 to 24 which were account print out of M/s. S.K.S. Infrastructure Ltd. having its address at 11, British Indian Street, Kolkata – 700 069. Referring to this seized documents, the learned AR submitted that pages 35 and 38 of AVR-2 contained rough notings relating to Evacuation Account. One entry referred to three bills of TIPL for dozer hire charges for December 2006, January/February 2007 for Rs. 8,54,876/-. Another two entries stated as follows: 2
ITA Nos. 2467 & 2468 A.Ys. 2007-08 & 2008-09 Tycoons Industries Pvt. Ltd.
“Paid to TIPL against bills vide cheque dated 30- Rs. 8,45,283/- Paid to TIPL as advance against dozer bills to be submitted in April/May/June/July 2007 Rs. 1,55,000/- Total Rs. 10,00,283/- 4. Referring to these notings on pages 35 and 38, the learned AR pointed out that these documents were seized from the business premises of Naresh Kumar Group (NKG) and not from the appellant. The notings referred to bills of ‘TIPL’ and payments made to ‘TIPL’ by cheque. According to the learned AR if the alleged incriminating documents “belonged” to the appellant then it would have contained notings for the amount paid to “TIPL”. Rather the notings would have been “amount received from”. The learned AR submitted that the very nature of notings in the seized documents clearly suggested that pages 35 and 38 did not ‘belong’ to TIPL i.e. the appellant company herein. As regards the reference made by the Ld. CIT(A) in pages 15 to 24 of AVR-2, which were computer print outs of M/s. S.K.S. Infrastructure Ltd., the learned AR submitted that ex-facie the document belonged to other entity, M/s. S.K.S. Infrastructure Ltd. and not that of the appellant. Merely because M/s. S.K.S. Infrastructure Ltd. shared the same business address with the appellant, could not lead to conclusion that the seized computer print-outs ‘belonged’ to the appellant. The learned AR, therefore, strongly urged that since none of the seized document referred to by the A.O. and Ld. CIT(A) ‘belonged’ to the appellant, the very assumption of jurisdiction u/s 153C of the Act by the A.O. was bad in law and therefore, the consequent order passed deserved to be cancelled.
On the other hand, the learned DR vehemently supported the orders of the lower authorities. According to him, the proceedings u/s 153C would be validly initiated if the documents found in the course of search ‘related’ to the person against whom the proceedings are initiated. For this learned DR drew our attention to relevant provisions of section 153C which reads as on today as under:
ITA Nos. 2467 & 2468 A.Ys. 2007-08 & 2008-09 Tycoons Industries Pvt. Ltd.
“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 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 in conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A.”
According to the learned DR for invocation of section 153C, it was no longer necessary to prove that the seized documents belonged to the assessee but it was sufficient to show that the seized documents pertains or information contained therein relate to the assessee. The learned DR, therefore, requested for dismissal of the appellant’s preliminary plea challenging the validity of the proceedings u/s 153C of the Act.
In his rejoinder, the learned AR pointed out that there was an amendment to the relevant provisions of section 153C which was enacted by the Finance Act 2015 and the word “relevant” was made to section 153C. Prior to the amendment in 2015, the relevant section 153C was as under:
“Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where 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
ITA Nos. 2467 & 2468 A.Ys. 2007-08 & 2008-09 Tycoons Industries Pvt. Ltd.
requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person.” 8. The learned AR pointed out that the impugned assessment order as well as the appellate orders were passed prior to the amendment made in section 153C by the Finance Act, 2015 and therefore, the un-amended provisions of section 153C governed the appellant’s case. As per the provision of section 153C as they stood prior to 2015, it was necessary for the Revenue to prove that the incriminating documents seized in the course of search ‘belonged’ to a person who was not the person searched. It is only in such cases that the A.O. of the person searched, was first required to record his satisfaction that seized documents belonged to such third person and thereafter delink the seized documents of third party from the searched persons file and thereafter transfer the relevant seized documents to the A.O. of such third person who thereafter has to record his satisfaction and then initiate proceedings under section 153C of the Act. The learned AR submitted that in the present case since the document bearing ID mark AVR-2 and AVR-5 were found in the possession of N.K.G. and the entries therein clearly established that the documents did not belong to the appellant, invocation of section 153C was untenable. In support of his contention, the learned AR relied on the following decisions:
Pepsico India Holding (P) Ltd. vs CIT (370 ITR 295) Vijaybhai N. Chandrani vs ACIT (333 ITR 436) DCIT vs Dhansar Engineering Co. Pvt. Ltd. (ITA 920 – 923/Kol/2013) 9. After having heard the rival submissions and having perused the material on record, we find that the Ld. CIT(A) have extensively reproduced the purported incriminating documents seized in the course of search carried out against N.K.G. The proceedings u/s 153C have been justified by the authorities below on the ground that seized documents bearing identification mark AVR-2 pages 1 to 24, 35 to 39 and AVR-5 pages 9 to 15 belonged to the appellant company. From the discussion in the assessment orders, we however note that the authorities below have mainly dealt with pages 35 and 38 of AVR-2 5
ITA Nos. 2467 & 2468 A.Ys. 2007-08 & 2008-09 Tycoons Industries Pvt. Ltd.
which contained notings under the heading “Evacuation Account”. The notings on page 35 and 38 certainly refer to 3 bills of TIPL and payment made to TIPL against such 3 bills. In the opinion of the lower authorities, the term “TIPL” used on pages 35 and 38 represented abbreviated form assessee’s full name that is Tycoons Industries Pvt. Ltd. Even if one for argument sake accepts the presumption drawn by the authorities below to be correct, yet we find the notings recorded in seized documents make reference to the payments made to TIPL by the person to whom the document belonged to. Admittedly in the present case, the document was found from the premises of N.K.G. with whom TIPL was having business transactions. In the circumstances, if the documents seized from the custody of Sr. Officer of N.K.G referred to payments made to TIPL then the only logical inference that one can draw is that the seized document belonged to the person who had made payment to TIPL. Admittedly therefore such documents could not be presumed to be belonging to the appellant that i.e. ‘TIPL’. Having regard to these facts, therefore, we have no hesitation in holding that the seized documents that are pages 35 and 38 of AVR-2 did not belong to the appellant company.
In the impugned order, the Ld. CIT(A) also has extracted pages 17, 18, 19 and 20 of AVR-2 which are computer print outs of account of M/s. S.K.S. Infrastructure Ltd. which shared the common office address with the appellant. Ex-facie these computer print outs belonged to M/s. S.K.S. Infrastructure Ltd. and not that of the appellant, which is separate juristic entity. Save and except the documents discussed in the foregoing, the Revenue did not bring on record any other seized documents which was proved to be belonging to the appellant so as to justify invocation of section 153C of the Act.
As regards the learned DR reference to section 153C as it now exists, we find that the expression ‘related to’ has been inserted and was made effective only from 01.06.2015. Till the amendment in 153C was carried out by 2015, before invoking section 153C it was mandatory for the Revenue to prove that the incriminating documents seized belonged to the third person who has not been searched and after recording the required satisfaction as 6
ITA Nos. 2467 & 2468 A.Ys. 2007-08 & 2008-09 Tycoons Industries Pvt. Ltd.
mandated by the section, then only could have invoked section 153C of the Act. Section 153C in such cases mandated the A.O. of the person searched, AO to first record his satisfaction that seized incriminating documents did not belong to the searched persons but to a third person and thereafter delink the seized material of the third party from the seized material of the searched persons file, and thereafter transfer the seized materials belonging to the third party to the jurisdictional AO of the third party, who thereafter has to record his satisfaction and then initiate proceedings for invoking section 153C of the Act. Therefore, in the facts and circumstances of the case it was mandatory for the A.O. to establish that the incriminating document seized belonged to such other person and recording of such findings about ownership of the seized document was a condition precedent. In the present case, the facts and material on record prove that the seized documents did not belong to the appellant company and therefore we hold that the proceedings u/s 153C could not have been validly initiated against the appellant company. Such findings of ours get support from the judgement of the Hon’ble Delhi High Court in the case of Pepsico India Holding Pvt. Ltd. (supra) and Honble Gujarat High Court in the case of Vijaybhai N. Chandrani (supra). We also note that the same issue was considered by the coordinate bench of this Tribunal in the case of M/s. Dhansar Engineering Co. Pvt. Ltd. (supra). In that case also the name of the assessee was mentioned in the seized documents AVR-2 recovered from the premises of N.K.G. In that case also the name of assessee was found mentioned in the seized documents AVR-2 recovered from premises of N.K.G. In that case also the A.O. held that the seized documents belonged to M/s. Dhansar Engineering Co. Pvt. Ltd. and not of N.K.G. After examining the relevant material, Tribunal held that although the notings in the seized documents made reference to the name of third party i.e. M/s. Dhansar Engineering Co. Pvt. Ltd but there was nothing in such seized documents to indicate that these documents belonged to M/s. Dhansar Engineering Co. Pvt. Ltd. The Tribunal accordingly quashed the assessment framed under section 153C against Dhansar Engineering Co. Pvt. Ltd, since it was found that seized documents recovered from N.K.G. did not belong to the said assessee.
ITA Nos. 2467 & 2468 A.Ys. 2007-08 & 2008-09 Tycoons Industries Pvt. Ltd.
For the reasons stated above and judicial precedents relied upon, we hold that the A.O. was not justified in invoking jurisdiction under section 153C of the Act. Since the A.O. did not have jurisdiction to invoke 153C jurisdiction, the very assumption of jurisdiction under section 153C of the Act is bad in law and therefore, the assessment order consequently passed is null in the eyes of law and therefore it is cancelled. Since the legal issue is in favor of assessee, other grounds are academic and so infructuous.
For the reasons stated above, both the appeals of the assessee are allowed.
Order is pronounced in the open court on 13.06.2018
Sd/- Sd/- (M. Balaganesh) (Aby. T. Varkey) Accountant Member Judicial Member
Dated : 13th June, 2018
Biswajit.(Sr.P.S.) Copy of the order forwarded to:
Appellant – M/s. Tycoons Industries Pvt. Ltd., 11, British Indian Street, Kolkata – 700 069. Respondent – DCIT, CC-XX, Kolkata. 2 3. The CIT(A) -3, Kolkata. (e-mailed)
CIT Kolkata 5. DR, ITAT, Kolkata. (e-mailed) /True Copy, By order,
Sr. Pvt. Secretary