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Income Tax Appellate Tribunal, DELHI BENCH: ‘C’ NEW DELHI
Before: SHRI J.S. REDDY & SHRI SUDHANSHU SRIVASTAVA
ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER: The appeal has been preferred by the Department against the order dated 26.06.2007 passed by the Ld. CIT (Appeals), Meerut for AY
2003-04 whereas the CO has been preferred by the assessee.
The facts, in brief, are that a Search & seizure operation u/s 132(1) of the Income Tax Act, 1961 was carried out on 07-10-2003 in Super
Tech Construction (P) Ltd at C1/9, Gokulpur, Shahadara and its head office and various project offices. During the course of search at the residence of one
Shri R. K. Arora, a copy of sale deed of land (registered on 18-01-2003) situated at Village Prahlad Garhi, Ghaziabad, (as per Annexure B-2 of the panchnama having an area of 194555.52 sq mts. ) was found and seized and based on this annexure it is alleged that M/s Panchsheel Homes (P) Ltd. i.e. the assessee have sold this land for Rs.4,06,70,000/ - to M/s Super Tech
Construction (P) Ltd. It has been the department’s contention that these documents are belonging to the company Panchsheel Homes (P) Ltd. and hence the case was covered u/s 153C of the 1. T. Act, 1961. Accordingly, notice u/s 153A (a) of the Income Tax Act, 1961 was issued on 27-07-05 to furnish the returns of income in respect of each year falling within six & CO No.83/D/07 Page 2 of 30 M/s Panchsheel Homes P. Ltd. assessment years referred to in clause (b) section 153A of the Income Tax
Act, l961. The relevant assessment years are from A. Y. 1998-99 to 2003-04.
For the year under consideration, the AO has opined that the assessee company had sold the land of project I situated at Prahlad Garhi, Near Judge colony, Vaishali to M/s Super Tech Constructions (P)
Ltd., Shahdara, Delhi on 18.01.2003.The sale was registered at a sum of Rs. 4,06,67,000/-. The AO has referred to a diary which was marked as ann. A-10 which was found and seized from the residence of Shri R. K.
Arora as per entry recorded on the overleaf of page no.
It was the AO’s contention that the land was actually sold for Rs. 5,86,66,560/- and the cost of stamp duty of Rs. 40,67,000/- was also paid by the purchaser and not by the vendor. The AO has recorded in the assessment order that one Shri Joginder Pal, a property dealer, also admitted in his statement recorded at the time of the search that the land was actually sold for Rs. 5,84,00,000/-. The AO further recorded that the difference of Rs. 1,79,99,560/- (5,86,66,560/- Rs. 4,06,67,000/-) and amount of stamp duty of Rs. 40,67,000/- were not recorded in the books of accounts of the assessee company. The AO further recorded that the assessee vide detailed submissions dated 18.01.2006 submitted that no money has & CO No.83/D/07 Page 3 of 30 M/s Panchsheel Homes P. Ltd. been taken from M/s Super Tech Constructions (P) Ltd except through account payee cheques. The assessee company also submitted various details before the ADI Ghaziabad and also submitted an affidavit of Shri Joginder Pal. It was further submitted by the assessee that the assessee had no control over the figures recorded in the others’ accounts books.
The assessee company also submitted that at the time of search that no such entry or money was reflected in the books of accounts of the assessee company. It was also submitted by the assessee before the AO that the director of M/s Super Tech Constructions (P) Ltd had in fact never admitted before the ADI that they had paid any money and cost of the stamp papers to the assessee company. Thus, the assessee company denied the entries in the diary. It was also submitted before the AO that the cost of stamp paper of Rs. 40,67,000/- and register expenses of Rs. 5,020/- were correctly debited in the Project I account. It was submitted that the cost of stamps purchased was met through a DD of Rs. 40,67,000/- made from the bank account of Oriental Bank of Commerce on 02.01.2003 whereon Rs. 500/- were also paid as bank charges. The draft was given to the treasury for the purchase of stamp papers of Rs. 40,67,000/- in the name of the assessee company and not in the name of M/s Super Tech Constructions (P) Ltd. As evidence, the assessee & CO No.83/D/07 Page 4 of 30 M/s Panchsheel Homes P. Ltd. company submitted the copy of the sale deed and copy of the bank statement reflecting the entry for the purchase of the DD and also demonstrated before the AO that the said entry was duly reflected in the books of accounts of the assessee company. However, the AO relying on the entries in the seized diary and the statement of Shri Joginder Pal (which was subsequently retracted) went on to conclude that M/s Panchsheel Homes (P) Ltd had received an amount of Rs. 1,79,99,500/- in cash and Rs. 40,67,000/- for stamp papers from M/s Super Tech Constructions (P) Ltd. which were not reflected in the regular books of accounts. Hence addition of Rs. 2,20,56,560/- (1,79,99,560 + 40,67,000) was made to the Income of Assessee Company for AY 03-04. The AO further observed that since the actual sale consideration was Rs. 5,86,66,560/- and since as per page 20 Annexure - A-3 of panchnama dated 10.10.2003 seized from the premises of Shri Joginder Pal, the amount of commission was mentioned as Rs. 6,00,000/- whereas the books reflected the commission paid at Rs. 4,06,700/-, the difference of Rs. 1,93,300/- (6,00,000 - 4,06,700) was to be added as unexplained expenditure u/s 69C of the Income Tax Act. 1961.
Aggrieved, the assesesee preferred an appeal before the First & CO No.83/D/07 Page 5 of 30 M/s Panchsheel Homes P. Ltd. Appellate Authority wherein the legal issue of non-service of notice u/s 143(2) of the Act was raised along with challenge to 153C proceedings. The addition was challenged on merits as well as well. The Ld. CIT (A) held that issuance of notice u/s 143(2) was not a statutory requirement for assessment u/s 153A and accordingly dismissed this ground of the assessee. The Ld. First Appellate Authority also did not accept the assessee’s alternate plea that the basic requirement to issue notice u/s 153A read with section 153C was not met. He opined that since the sale agreements seized from the residence of Shri R.K. Arora mentioned the assessee’s name, the issue of notice u/s 153A was valid. However, the Ld. CIT (A) went on to hold that the mere recording of a figure in some diary or loose paper without any evidence particularly in the absence of name of a particular person could not be held against the said particular person or presumed to belong to the said person. He referred to the affidavits filed by the broker Shri Joginder Pal affirming that no undisclosed payment was made from the purchaser to the seller i.e. the assessee. He also gave weight to the assessee’s submission that Shri R.K. Arora was not allowed to be cross-examined by the assessee, although the assessee had specifically requested so. The additions were finally deleted by the Ld. CIT (A). & CO No.83/D/07 Page 6 of 30 M/s Panchsheel Homes P. Ltd.
Now the department is in appeal before us while the assessee has preferred to file a CO. The grounds of appeal raised by the department are as under:
The ld. CIT (A), Meerut has erred in law and on facts in deleting the addition of Rs. 2,20,56,560/- made on account of receipt of money in sale of property as well as money received for payment of stamp duty.
2. The ld. CIT (A) Meerut, has erred in law and on facts in deleting the addition of Rs. 1,93,900/- made on account of brokerage. 3. In doing so, the ld. CIT(A), Meerut has not appreciated the following facts: i. That the sale consideration of Rs. 5,86,66,560/- was found recorded in the diary, marked annex A-10, found from the residence of Sh. P.K. Arora, M.D., of the purchaser company M/s Suptertech. The fact that the actual sale price was Rs. 5,86,66,560/- as against Rs. 4,06,67,000/- declared in the sale deed, finds ample support from the cash flow statement filed by the purchaser company during the course of assessment proceedings. ii. That search was also conducted in the premises of the broker Sh. Jogender Pal and as per the document recovered, placed at page 20 of annexure marked A-3, the details of the land were mentioned as under: Land Cost Rs. 5,84,00,000/- Commission Rs. 6,00,000/- Register Charges Rs. 41,00,000/- iii. The broker had, in his statement recovered on 07.10.2003, also admitted that the transaction was actually made for Rs. 5,84,000/-.
& CO No.83/D/07 Page 7 of 30 M/s Panchsheel Homes P. Ltd. iv. That the act of retracting on his statement by the broker by means of filing affidavit, had no evidentiary value because his admission was based on the documents recovered from his during the search in his premises whereas the affidavits were simple denials without any concrete basis. v. That the department had sufficient evidence, as mentioned above, for adding as income on money received Rs. 1,79,99,500/- [Rs. 5,86,66,560/- - Rs. 4,06,67,000/-] towards undisclosed sale consideration and Rs. 40,67,000/- towards stamp duty and the unexplained expenditure on commission paid to the broker Rs. 1,93,300/- (Rs. 6,00,000/- - Rs. 4,06,700/-) 4. That the order of the ld. CIT (A), Meerut being erroneous may be set aside and that of the AO be restored.
5. That the appellant craves leave to amend anyone or more of the grounds of appeal as stated above as and when need for doing so may arise.
6. The grounds raised in the CO of the assessee are as under:
1. That the ld. CIT(Appeals) has erred both on facts and in law in not holding the assessment as framed by the ld. AO as ab initio void even after holding that no notice u/s 143(2) of the I.T. Act had been issued by the AO. The finding that there is no requirement in law to issue a notice u/s 143(2) in order to assume a valid jurisdiction to make an assessment u/s 153A of the I.T. Act is wholly incorrect and is contrary to the provisions contained in section 153A of the Act. The ld. CIT (Appeals) has overlooked that clause (i) of Explanation to section & CO No.83/D/07 Page 8 of 30 M/s Panchsheel Homes P. Ltd.
153A of the Act clearly provides that “all other provisions of this Act shall apply to the assessment made under this section”.
2. That the ld. CIT(Appeals) has erred both on facts and in law in upholding the assessment framed u/s 153A r.w. section 153C of the Act even after holding that during the course of search conducted on M/s Super Tech, nothing pertaining to the assessment was seized or found. The ld. CIT(Appeals) has failed to appreciate that the assessment as framed is ab-initio void and without jurisdiction in as much as no satisfaction, as is the mandate u/s 153C of the Act, had been recorded and forwarded by the AO of the searched party to the AO of the assessee, to the effect that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned during the course of search conducted upon his assessee, belongs or belong to the assessee.
It is, therefore, prayed that the assessment as framed by the AO and upheld by the ld. CIT (Appeals) be annulled as bad in law and without jurisdiction and the cross objections be allowed.
At the outset, the Ld. AR submitted that the assessee’s CO may be taken up first as it is on the legal ground and that its outcome will have a bearing on the department’s appeal. The Ld. CIT DR, however, raised objection to the maintainability of the CO itself. Hence it was deemed fit to hear the arguments of both the sides on the maintainability of the CO before & CO No.83/D/07 Page 9 of 30 M/s Panchsheel Homes P. Ltd. proceeding to adjudicate on the grounds of appeal/CO. The Ld. AR submitted that although the Ld. CIT (A) had allowed the assessee’s appeal on merits but Ground Nos. 9 to 11 on the issue of Notice u/s 143(2) and Ground No. 12 on the issue of legality of proceedings u/s 153C were rejected by the Ld. CIT (A) and hence the CO was very much maintainable.
It was submitted that the grounds as raised in the CO are equally covered by the order of the Ld. CIT (A) and hence the statutory right to appeal u/s 253(1) was available to the assessee company. Since the assessee company’s appeal was allowed on merits of the case, the company had opted not to file the appeal on the rejected grounds. However, the legal right to file the appeal was very much available u/s 253(1). So, it is wrong to say that the assessee did not have any right/scope of filling of appeal U/s 253(1).
Reliance was placed on CIT Tamil Nadu vs. Sundaram Clayton Ltd. 136 ITR 315 (Mad.). Reliance was further placed on the following cases-
-CIT vs. Purbanchal Parbahan Gosthi (1998) 234 ITR 663 (Gauhati HC). – -NTPC Case 229 ITR 383 (SC) -CIT Vs New India Assurance Co. Ltd. (1983) 141 ITR 367
-DCIT vs. Silver Line (Delhi ITAT) in 1506, 1505, 1504/Del/2013 ITA No. 4144/D/07 & CO No.83/D/07 Page 10 of 30 M/s Panchsheel Homes P. Ltd.
-Ashian Needles (P) Ltd. Vs CIT (Delhi High Court order dated 06/07/2012)
Opposing the CO, the Ld. CIT DR submitted that since the assessee had been allowed full relief (on merits), there is no cause of grievance, therefore, no appeal can be filed u/s 253(1). The cross objection is substitute for appeal and its scope cannot be extended beyond the scope of appeal U/s 253(1) of which it is a substitute. Reliance was placed by the Ld. CIT DR on the following judicial rulings- -Kanpur Industrial Works vs CIT (1966) 59 ITR 407 (All HC)
-MTNL Vs Telecom Regulatory Authority of India AIR 2000 Delhi 208 -DCIT Vs Sandip M Patel (2012) 22 taxmann.com 288 (Ahmedabad Tribunal)
We have heard the rival contentions on the maintainability of the CO. Under Section 253(4) of the Income Tax Act, 1961, the assessee is entitled to file cross objection even if he has not filed an appeal against the order of CIT (A). Sub section (4) of section 253 reads as under:
“(4) The Assesings Officer or the assessee, as the case may be, on receipt of notice that an appeal against the order of the Deputy Commissioner (Appeals)or, as the case may be, the & CO No.83/D/07 Page 11 of 30 M/s Panchsheel Homes P. Ltd.
Commissioner (Appeals) has been preferred under sub-section (1) or subsection (2) by the other party, may, notwithstanding that he may not have appealed against such order or any part thereof; within thirty days of the receipt of the notice, file a memorandum of cross-objections, verified in the prescribed manner, against any part of the order of the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals), and such memorandum shall be disposed of by the Appellate Tribunal as if it were an appeal presented within the time specified in sub- section (3).”
A bare reading of the provisions contained in sub section (4) would show that the right to file a memorandum of cross objections is an independent right given to the opposite party in an appeal and it is in addition to the independent right of appeal, which may or may not be exercised by the assessee under sub section (1) or by the Department under sub section (2) of section 253. In a given case it is quite possible that certain matters may not be agitated either by the Ld. Commissioner or by the assessee by way of an appeal, but if any appeal is filed either by the assessee or the assessing officer, then the opposite party may consider it necessary to file a cross objection in respect of such matters, which were not fit originally to be agitated by way of an independent appeal as has been held by Hon'ble Bombay High Court in the case of CIT Vs. New India Assurance Co. Ltd. (1983) 141 ITR 367 (Bom). Thus sub section (4) of section 253 of the Act confers a right of cross objection both on the assessee and the Revenue. The & CO No.83/D/07 Page 12 of 30 M/s Panchsheel Homes P. Ltd.
words "the assessing officer or the assessee, as the case may be,………may, notwithstanding that he may not have appealed against such order or any part thereof;………………..file a memorandum of cross objections…………against any part of the order" appearing in section 253(4) postulate that in respect of the same order of the appellate authority there may be an appeal by the assessee as to one part and an appeal by the Revenue as to the other where the assessee or the Revenue has preferred an appeal to the Tribunal against that part of the order of the appellate authority which consists of decisions recorded against him, the other party if he had not already appealed, may file cross objections against that part of the order of the appellate authority, which consists of the decisions with which he is dissatisfied. The appeal by the assessee or the Revenue may be against any parts of the order of the appellate authority which are against him and by which he is aggrieved. It is, therefore, imperative that there must be a decision of the appellate authority by which the assessee or Revenue is aggrieved before he can prefer an appeal against that part of the order of the appellate authority containing such decision.
Further the existence of expression “against any part of the order” in section 254(3) of IT Act clearly suggests that the cross objection can be & CO No.83/D/07 Page 13 of 30 M/s Panchsheel Homes P. Ltd. filed only in cases where the appellate authority has decided against the party. Further under rule 27 of ITAT Rules, 1963 the respondent can support the order of CIT (A) in cross objection on the basis of adverse findings of CIT (A) against him. This means that there has to be a decision of the CIT (A) on the issue raised in cross objection.
In the case of Income-tax Officer v Fagoomal Lakshmi Chand [1979]
118 ITR 766 (Mad) against the order of the AAC, which was prejudicial to the Revenue, the department took up the matter before the Tribunal. After the filing of the appeal, the assessee taking advantage of the provisions in section 253(4) filed a memorandum of cross-objection against the entire order of the AAC. Both the appeal and the memorandum of cross-objection came up for hearing before the Tribunal. The assessee was not present. The Tribunal disposed of the Revenue’s appeal and, in consequence, dismissed the cross-objection. Thereafter, the assessee filed an application before the Tribunal stating that there was sufficient cause for his non-appearance when his cross-objection were called for hearing, and the Tribunal made an order setting aside the dismissal of the cross-objection. Effectually, therefore, they had set aside the order passed by them ex-parte in the Revenue’s appeal as well. On writ, the Single Judge dismissed it at the admission stage itself. On & CO No.83/D/07 Page 14 of 30 M/s Panchsheel Homes P. Ltd. writ appeal the Revenue contended that a memorandum of cross-objection could only be against a part of the order of the AAC and that as, in the instant case, the appeal was disposed of ex parte by the Tribunal, the proviso to rule 24, which contemplates only the restoration of an appeal, which was dismissed for default, and that too for sufficient cause, would not apply.
Hon’ble Madras High Court has held that the words employed under sub-s.
(4) of sec. 253 of the I.T. Act, 1961, would show that such memorandum of cross- objection shall be against any part of the order of the AAC. The use of the expression "any part of the order" is clearly indicia to show that it could be also against the entirety of the order of the AAC in so far as it is prejudicial to the cross-objector. Therefore, the contention that the memorandum of cross objection filed by the assessee, in the instant case, was said to be against the whole of the order of the AAC, and that by itself was sufficient to reject the same on the threshold, was not sustainable.
In the case of CIT v Purbanchal Paribahan Goshti 234 ITR 663 (Gau) Hon’ble High Court has held that section 253 (4) of the Income-tax Act, 1961, read with rule 22 of the Income-tax (Appellate Tribunal) Rules, 1963 provides that any party aggrieved against order of appellate authority can file memorandum of cross objection against any part of order of & CO No.83/D/07 Page 15 of 30 M/s Panchsheel Homes P. Ltd. appellate authority and cross-objection need not be confined to points taken by opposite party in main appeal.
14. The Hon’ble Bombay High Court in the case of CIT vs. New India Assurance Co. Ltd. 149 ITR 367 (Bom.) held as under:
“Now, a bare reading of s. 253(4) of the IT Act, 1961, will show that the right to file a memorandum of cross-objections is an independent right given to the opposite party in an appeal and it is in addition to the independent right of appeal which may or may not be exercised by the assessee under s. 253(1) or by the ITO at the instance of the Commissioner in s. 253(2) of the Act. It is not possible for us to read any restriction in sub-s.(4) of s. 253 which has the effect of restricting this right to file a cross-objection. In a given case, it is quite possible that certain matters may not be agitated either by the Commissioner or the assessee by way of an appeal, but if any appeal is filed either by the assessee or the ITO, then the opposite party might consider it necessary to file a cross-objection in respect of such matters which were not thought it originally to be agitated by way of an independent appeal. It is common experience that orders under the IT Act decide several questions of controversy between the Revenue and the assessee and if, in a given case, either the assessee or the ITO chooses to restrict his appeal only to certain questions or findings, having regard to a positive right to file a cross-objection, he can, on second thoughts, be permitted to challenge the finding which was not originally challenged in the appeal provided, of course, the cross-objection is filed in the manner & CO No.83/D/07 Page 16 of 30 M/s Panchsheel Homes P. Ltd. prescribed by law and within the limitation prescribed by law.”
Hence, in the light of the judicial precedents as discussed aforesaid, we are of the opinion that the CO of the assessee is maintainable and hence we permit the assessee to press its CO and allow it to argue the grounds
Arguing on the grounds of the CO, the Ld. AR argued that the entire proceedings u/s 153A were void as the notice u/s 143(2) was never
issued/served on the assessee prior to the commencement of the proceedings. It was further submitted that the ADI had recorded statements of three directors – Shri Ashok Chaudhary, Shri S.C. Gupta and Shri J.K.
Jain. However, no incriminating fact about the assessee is available in the statements of these three persons. He drew attention to pages 111-112 of the paper book which contains a copy of the communication dated
08.06.2007 from the Ld. CIT (A) to the AO seeking comments of the latter on four issues viz: (i) Why no opportunity was provided to the assessee to cross examine the MD of M/s Super Tech Constructions (P) Ltd. and Shri
Joginder Pal? (ii) How the revised cash-flow of M/s Super Tech
Constructions (P) Ltd. showing cash payment to the assessee was accepted without calling for comments from the asssessee? (iii)Whether there was & CO No.83/D/07 Page 17 of 30 M/s Panchsheel Homes P. Ltd. any conclusive evidence that the assessee had received a cash payment of Rs. 2,20,67,000/- from M/s Super Tech Constructions (P) Ltd. ? and (iv)
Whether any addition was made in the hands of M/s Super Tech
Constructions (P) Ltd. for the cash payment of Rs. 2,20,67,000/- made to the assessee? The Ld. AR submitted that these issues were not addressed by the AO in the remand report. It was further submitted that the AO had framed the assessment entirely on the basis of cash flow statement of M/s
Super Tech Constructions (P) Ltd. filed on 28.11.2005 whereas the notice u/s 153C dated 27.07.2005 was issued on the basis of three documents viz; the diary of Shri R.K. Arora, paper relating to Shri Joginder Pal and the Sale Deed. It was submitted that the department has alleged that these three documents belonged to the assessee company but while framing the assessment the additions have been made on the basis of the revised cash flow statement submitted by M/s Super Tech Constructions (P) Ltd. the Ld.
AR submitted that Shri R. K. Arora has never said that the seized documents do not belong to him but belong to some other person/the assessee. It was submitted that section - 132(4A) provides that where any books of account or other documents are found in the possession or control of any person in the course of a search, it may be presumed that such books of account or documents belong to such person. It was emphasized that & CO No.83/D/07 Page 18 of 30 M/s Panchsheel Homes P. Ltd. such sale deed and agreement have never been disowned by the Super Tech group so as to draw the inference that they belonged to the assessee. It was submitted that a registered sale deed belongs to the purchaser of the property although it obviously "relates to" or "refers to" the vendor. It was submitted that section 153C specifies that if valuable or books of account or documents belonging to other persons are seized then action under Section 153C can be taken against that person while in the instant case the seized paper, diary and the sale deed as seized at the premises M/s Super Tech does not belong to the assessee. Therefore the assessing officer was not justified in initiating the action u/s 153A r/w Section - 153C of the Income
Tax Act, 1961. The Ld. AR relied on the decision of the Hon’ble Delhi
High Court in Pepsi Foods Pvt. Ltd. vs. ACIT in WP(C) No. 415 of 2014 to highlight the difference between the terms ‘belongs to’ and ‘relates to’ or ‘refers to’. The Ld. AR further relied on another decision of the Hon’ble
Delhi High Court in Commissioner of Income Tax (Central) - III Vs Kabul
Chawla in 709/2014 and 713/2014 for the proposition that the assessment can be made only on the basis of incriminating material found during the course of search. The Ld. AR also submitted that the similar addition of Rs. 1,93,300/- on account of unrecorded brokerage made in the case of Shri Joginder Pal which was confirmed by the Ld. CIT & CO No.83/D/07 Page 19 of 30 M/s Panchsheel Homes P. Ltd.
(A) has been deleted by the ITAT vide order in ITA No.: 3954/DEL/107 dated 23.05.2008.
In response, the ld. CIT DR submitted that there is no specific provision in the Act requiring the assessment made under section 153 A to be made only after the issue of notice under section 143(2). Reliance was placed on (i) decision of Hon’ble Delhi High Court in Ashok Chaddha v.
Income-tax Officer [2012] 20 taxmann.com 387 (Delhi), (ii) decision of ITAT Lucknow “B” Bench, in Shri Jeevan Kumar Agarwal Vs. ACIT in to 348/LKW/2013 Asstt.Yrs.:2001-02, 2002-03 & 2005-06 for the proposition. The Ld. DR further submitted that there is no specific requirement of recording satisfaction in contrast with provisions of section
As ruled by Hon’ble Supreme Court in case of Keshavji Ravji and Co.
183 ITR 1, when there is no ambiguity in statutory language, resorting to interpretative process to unfold the legislative intent becomes impermissible.
It was submitted that the Hon’ble High Court of Kerala in case of Dr. K M Mehboob vs. DCIT, 2012-TIOL-642-HC-KERALA-IT held that the satisfaction is not required to be recorded in case of section 153C. It was submitted that the satisfaction note has been recorded by the Asstt.
Commissioner of Income Tax, CC-Meerut on 27.07.2005(a copy of the same was submitted to the Bench). It was submitted that a perusal of said note & CO No.83/D/07 Page 20 of 30 M/s Panchsheel Homes P. Ltd. shows that the said note is written in the capacity of the AO of the person in whose case search u/s 132 has been conducted. Incidentally the AO is also the AO of the assessee and hence, he has specified the document belonging to the assessee and concluded that case of the assessee is covered u/s 153C.
The Ld. DR referred to a judgment of the Hon’ble Supreme Court in Deepak Agro Foods vs. State of Rajasthan and Others 2008 – TIOL- 134 – SC- CT wherein the Hon’ble Apex Court has opined that all irregular or erroneous or even illegal orders cannot be held to be null and void as there is a fine distinction between orders which are null and void and orders which are irregular, wrong or illegal. Where an authority making order lacks inherent jurisdiction, such order would be without jurisdiction, null, non est and void ab initio as defect of jurisdiction of an authority goes to the root of the matter and strikes at its very authority to pass any order and such a defect cannot be cured even by consent of the parties. However, exercise of jurisdiction in a wrongful manner cannot result in a nullity - it is an illegality, capable of being cured in a duly constituted legal proceedings. It was submitted that proceedings for assessment under a fiscal statute are not in the nature of judicial proceedings, like proceedings in a suit inasmuch as the assessing officer does not adjudicate on an issue between an assessee and the State and, therefore, the law on the issue laid down under the civil law & CO No.83/D/07 Page 21 of 30 M/s Panchsheel Homes P. Ltd. may not stricto sensu apply to assessment proceedings. The Ld. DR further submitted that in Rafique Bibi (Dead) By LRs. Vs. Sayed Waliuddin (Dead)
By LRs. & Ors.2, explaining the distinction between "null and void decree" and "illegal decree", the Hon’ble Apex Court has said that a decree can be said to be without jurisdiction, and hence a nullity, if the Court passing the decree has usurped a jurisdiction which it did not have; a mere wrong exercise of jurisdiction does not result in a nullity. It was also submitted that lack of jurisdiction in the court passing the decree must be patent on its face in order to enable the executing court to take cognizance of such a nullity based on want of jurisdiction and that a distinction exists between a decree passed by a court having no jurisdiction and consequently being a nullity and not executable and a decree of the court which is merely illegal or not passed in accordance with the procedure laid down by law. A decree suffering from illegality or irregularity of procedure cannot be termed in- executable.
We have heard the rival submissions and perused the material on record. As far as the assessee’s first argument regarding non-issue of notice u/s 143(2) prior to the assumption of proceedings u/s 153A are concerned, it is our considered opinion that the words 'so far as may be' in & CO No.83/D/07 Page 22 of 30 M/s Panchsheel Homes P. Ltd. clause {a) of sub-section (1) of section 153 A cannot be interpreted that the issue of notice under section 143(2) is mandatory in case of assessment under section 153 A. The use of the words 'so far as may be' cannot be stretched to the extent of mandatory issue of notice under section 143(2). A specific notice is required to be issued under clause (a) of sub-section (1) of section 153A calling upon the persons searched or requisitioned to file return. Therefore, no further notice under section 143(2) is contemplated for assessment under section 153 A. The Hon’ble Delhi High Court in Ashok Chaddha vs. ITO (supra) has opined that “section 153A provides for the procedure for assessment in case of search or requisition. Sub section (1) strats with a non-obstante clause stating that it was “notwithstanding” anything contained in sections 147,148 and 149, etc. Clause (a) thereof provides for issuance of notice to the person searched u/s 132 or where documents etc. are requisitioned u/s 132(A), to furnish a return of income.
This clause nowhere prescribes for issuance of notice u/s 143(2). The words ‘so far as may be’ in clause {a) of sub-section (1) of section 153 A cannot be interpreted that the issue of notice under section 143(2) is mandatory in case of assessment under section 153 A. The use of the words 'so far as may be' cannot be stretched to the extent of mandatory issue of notice under section 143(2).as is noted, a specific notice is required to be issued under clause (a) & CO No.83/D/07 Page 23 of 30 M/s Panchsheel Homes P. Ltd. of sub-section (1) of section 153A calling upon the persons searched or requisitioned to file return. Therefore, no further notice under section 143(2) is contemplated for assessment under section 153 A.” Hence, we concur with the submissions of the Ld. CIT DR on this issue and dismiss ground no. 1 of the assessee’s CO.
Coming to the second ground in the assessee’s CO, it is the assessee’s contention that the satisfaction as envisaged in section 153C that the seized documents belonged to the assessee is missing and therefore the entire assessment is void ab initio. We have carefully perused the documents on record. We have gone through the statements recorded during the time of search and also the satisfaction note prepared by the AO of the searched party. As far as the contention of the assessee that ‘no satisfaction note was prepared at all’ is concerned, we do not agree with the same. Some kind of satisfaction note has in fact been prepared and is available on record but the essential question that has to be considered is whether the satisfaction note meets the requirements of the section. For a ready reference, the impugned ‘satisfaction note’ is reproduced as under:
“Search & seizure operation u/s 132(1) of the Income Tax Act, 1961 were carried out on 07.10.2003 in the Super Tech Construction (P) Ltd., C-1/9, Gokul pur Shahdara, and its head office and various project offices. During the course of search at the residence of Shri & CO No.83/D/07 Page 24 of 30 M/s Panchsheel Homes P. Ltd.
R.K. Arora, as per ann. B-2 of the panchnama copy of sale deed of land situated at Village Prahlad Garhi, Ghaziabad, area of 194555.52 sq. mts was found and seized by which M/s Panchsheel Homes P. Ltd., have sold for Rs. 4,06,70,000/- to M/s Super Tech Construction P. Ltd. The sale deed was registered on 18.01.2003. Copies of sale deed by which the agriculture land comprised in the above said plot were purchased by M/s Panchsheel Homes P. Ltd. were also found and seized. Similarly, copies of agreement to sale of the agriculture land purchased from various vendors were found and seized as per annexure B-25 seized from the residence of Shri R.K. Arora. These documents are belonging to the company. Hence, case of M/s Panchsheel Homes P. Ltd. is covered u/s 153C of the I.T. Act, 1961. Accordingly, issue notice u/s 153A (a) of the Income Tax Act, 1961 to M/s Panchsheel Homes P. Ltd. to file the return of Income in respect of each assessment year falling within six assessment referred to in clause (b) of sec. 153(A) of the Act, 1961.”
A perusal of the above ‘satisfaction note’ shows that the same just mentions that during the course of search at the premises of M/s Super Tech Construction (P) Ltd. , copies of sale deed, purchase deed, agreements to sale etc were found and that these documents belong to the company. The ‘satisfaction note’ does not specifically mention even the name of the company to which it is alleged to be belonging to i.e. whether to the assessee or to Super Tech Construction (P) Ltd. Even assuming that the ‘company’ referred to is the ‘assessee’, it is not specified as to how the AO has arrived at that ‘satisfaction’. It is an undisputed fact, apparent from the records, that M/s Super Tech Construction (P) Ltd. has never denied that the seized documents belonged to them. It is settled law that whenever a document is & CO No.83/D/07 Page 25 of 30 M/s Panchsheel Homes P. Ltd. found from a person who is being searched, the normal presumption is that the said document belongs to that person. Section 132(4A)(i) clearly stipulates so. There has been no statement/evidence on record which would incriminate the assessee and would serve as an evidence to prove that the seized documents belonged to the assessee. There was a statement of Shri Joginder Singh which could have possibly linked the assessee to the seized documents but the same was retracted. The AO has not been able to bring any cogent material on record to prove that the impugned documents belonged to the assessee so as to assume jurisdiction u/s 153C of the Act. In our opinion, a mere statement that the impugned documents belong to the assessee would not discharge the onus cast upon the department. It is very much evident from the satisfaction note produced above that apart from saying that the documents belonged to the assessee, there is nothing that would indicate as to how the presumption as stipulated in section 132(4A)(i) is negated. The Hon’ble Delhi High Court in Pepsi Foods Pvt. Ltd (supra) has opined that the satisfaction note itself must display the reasons or basis for the conclusion that the AO of the searched person is satisfied that the seized documents belong to a person other than the searched person. The Hon’ble Delhi High Court in Pepsi Foods Pvt. Ltd. (supra) observed as under: & CO No.83/D/07 Page 26 of 30 M/s Panchsheel Homes P. Ltd.
“ 6. On a plain reading of Section 153C, it is evident that the Assessing Officer of the searched person must be “satisfied” that inter alia any document seized or requisitioned “belongs to” a person other than the searched person. It is only then that the Assessing Officer of the searched person can handover such document to the Assessing Officer having jurisdiction over such other person (other than the searched person). Furthermore, it is only after such handing over that the Assessing Officer of such other person can issue a notice to that person and assess or reassess his income in accordance with the provisions of Section 153A. Therefore, before a notice under Section 153C can be issued two steps have to be taken. The first step is that the Assessing Officer of the person who is searched must arrive at a clear satisfaction that a document seized from him does not belong to him but to some other person. The second step is - after such satisfaction is arrived at - that the document is handed over to the Assessing Officer of the person to whom the said document “belongs”. In the present cases it has been urged on behalf of the petitioner that the first step itself has not been fulfilled. For this purpose it would be necessary to examine the provisions of presumptions as indicated above. Section 132(4A)(i) clearly stipulates that when inter alia any document is found in the possession or control of any person in the course of a search it may be presumed that such document belongs to such person. It is similarly provided in Section 292C (1)(i). In other words, whenever a document is found from a person who is being searched the normal presumption is that the said document belongs to that person. It is for & CO No.83/D/07 Page 27 of 30 M/s Panchsheel Homes P. Ltd. the Assessing Officer to rebut that presumption and come to a conclusion or “satisfaction” that the document in fact belongs to somebody else. There must be some cogent material available with the Assessing Officer before he/she arrives at the satisfaction that the seized document does not belong to the searched person but to somebody else. Surmise and conjecture cannot take the place of “satisfaction”. xxxx xxxx xxxx xxxx xxxx
“11. It is evident from the above satisfaction note that apart from saying that the documents belonged to the petitioner and that the Assessing Officer is satisfied that it is a fit case for issuance of a notice under Section 153C, there is nothing which would indicate as to how the presumptions which are to be normally raised as indicated above, have been rebutted by the Assessing Officer. Mere use or mention of the word “satisfaction” or the words “I am satisfied” in the order or the note would not meet the requirement of the concept of satisfaction as used in Section 153C of the said Act. The satisfaction note itself must display the reasons or basis for the conclusion that the Assessing Officer of the searched person is satisfied that the seized documents belong to a person other than the searched person. We are afraid, that going through the contents of the satisfaction note, we are unable to discern any “satisfaction” of the kind required under Section 153C of the said Act.”
Therefore, on consideration of the entire factual matrix as well as & CO No.83/D/07 Page 28 of 30 M/s Panchsheel Homes P. Ltd. documents on record, especially the ‘satisfaction note’ and the judicial ruling of the Hon’ble Delhi High Court in Pepsi Foods Pvt. Ltd. (supra), we hold that the concept of satisfaction as envisaged in section 153C has not been met by the impugned satisfaction note. The AO has failed to establish in clear terms as to how the seized documents could be said to be belonging to the assessee. Therefore, the entire foundation of proceedings is knocked down. We have no alternative but to hold the entire impugned assessment proceedings for the year under consideration as void ab initio. We set aside the order of the Ld. CIT (A) and quash the impugned assessment proceedings. Ground No. 2 of the assessee’s CO is allowed.
In view of our findings in the CO, the departmental appeal becomes in fructuous and is accordingly dismissed.
In the final result, the CO of the assessee is partly allowed whereas the appeal of the department is dismissed.