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Income Tax Appellate Tribunal, DELHI BENCH: ‘A’ NEW DELHI
Before: SHRI G.D. AGRAWAL, HON’BLE & SHRI SUDHANSHU SRIVASTAVA
ITA 3951 has been preferred by the department against the impugned order dated 22.05.2012 passed by the Ld. CIT (A) – III,
New Delhi for AY 2007-08 whereas CO 138 has been preferred by the asssessee for the same year. ITA 3952 has been preferred by the department against the impugned order dated 23.05.2012 passed by the Ld. CIT (A) – III, New Delhi for AY 2008-09 whereas
CO 139 has been preferred by the asssessee for the same year.
ITA 3953 has been preferred by the department against the impugned order dated 23.05.2012 passed by the Ld. CIT (A) – III,
New Delhi for AY 2009-10. All these appeals/CO were heard together and since the issue involved is common in all the three years, the same are being disposed of through this common order.
The facts of the case are that there was search u/s 132 of the Income Tax Act, 1961 in the case of Nimitya Group of Companies
(of Sh. Sanjeev Mahajan) along with the alleged sub group known as Ninex Group (of Sh. Ram Mehar Garg i.e. the assessee and Sh.
Jagminder Gupta). Additions have been made to the income of the assessee for all the years on the basis of a seized document annexure A-1 page 37 found from the possession of Sh. Sanjeev
Mahajan of Nimitya Group whereas the assessee has been strongly contending all through out that as a result of search in the case of assessee, no incriminating document or material was found or seized relating to any undisclosed income whereas the AO has alleged that the above referred seized annexure contains details of payment made by Sh. Sanjeev Mahajan to Sh. Ram Mehar Garg against sale of property referred to as Hotel in City Mart project and the same was treated as unaccounted income in the hands of the assessee. As per the AO, there is reference to cash payment in the said annexure A- 1 to the extent of Rs. 20.10 crores pertaining to AY 2007-08 to 2009-10 as per details given here under:
Assessment Returned Assessed Income Addition on Year Income account of seized Document of Sh. Sanjeev Mahajan 2007-08 15,01,874.00 11,40,01,874.00 11,25,00,000.00 2008-09 8,52,730.00 5,43,52,730.00 5,35,00,000.00 2009-10 20,56,731.00 3,70,56,731.00 3,50,00,000.00 Total 20,10,00,000.00 on merits as well as on the legal ground that the proceedings u/s 153A of the Act were not legally tenable as there was no reference to any seized document found from the possession of the assessee or found belonging to the assessee in the context of alleged undisclosed income of the assessee and that the entire addition was based on Annexure -1 seized from the possession of Mr.
Sanjeev Mahajan. It was also pleaded that no satisfaction was recorded u/s 153C by the AO having jurisdiction over the case of Shri Sanjeev Mahajan. The Ld. CIT (A) deleted the entire additions in all the three years on the ground that the AO could not demonstrate that the seized document belonged to the assessee.
Now both the department as well as the assessee are before the Tribunal and have framed the following grounds -
On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition of Rs. 11,25 crores made by the Assessing Officer on account of unaccounted cash receipts by holding that the seized document does not belong to the assessee.
2. On the facts and in the circumstances of the case, the CIT (A) has not correctly interpreted the provisions of 5 3952 & 3953/D/2012 & CO Nos. 138 & 139/D/2013 section 153A r.w.s. 132(4A) and 292C of the Income Tax Act, 1961.
On the facts and in the circumstances of the case, the CIT (A) has not appreciated the fact that the CIT (A) himself has confirmed the addition of Rs. 11.25 crores made in the hands of Sh. Sanjeev Mahajan on acount of unaccounted cash payments on the basis of same document thus validating the transaction recorded in the seized document and the stand taken by the AO.
4. The order of the CIT (A) is erroneous and is not tenable on facts and in law.
The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”
1. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition of Rs. 5.35 crores made by the Assessing Officer on account of unaccounted cash receipts by holding that the seized document does not belong to the assessee.
2. On the facts and in the circumstances of the case, the CIT (A) has not correctly interpreted the provisions of section 153A r.w.s. 132(4A) and 292C of the Income Tax Act, 1961. 3. On the facts and in the circumstances of the case, the CIT(A) has not appreciated the fact that the CIT(A) himself has confirmed the addition of Rs. 2.35 crores out of Rs. 5.35 crores made in the hands of Sh. Sanjeev Mahajan on acount of unaccounted cash payments on the basis of same document thus validating the transaction recorded in the seized document and the stand taken by the AO. 4. The order of the CIT (A) is erroneous and is not tenable on facts and in law.
6 3952 & 3953/D/2012 & CO Nos. 138 & 139/D/2013 5. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”
1. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition of Rs. 3.50 crores made by the Assessing Officer on account of unaccounted cash receipts by holding that the seized document does not belong to the assessee.
2. On the facts and in the circumstances of the case, the CIT (A) has not correctly interpreted the provisions of section 153A r.w.s. 132(4A) and 292C of the Income Tax Act, 1961. 3. On the facts and in the circumstances of the case, the CIT(A) has not appreciated the fact that the CIT(A) himself has confirmed the addition of Rs. 3.50 crores made in the hands of Sh. Sanjeev Mahajan on acount of unaccounted cash payments on the basis of same document thus validating the transaction recorded in the seized document and the stand taken by the AO. 4. The order of the CIT (A) is erroneous and is not tenable on facts and in law. 5. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”
D. Grounds of CO No. 138/D/2013: 1. That on the facts and circumstances of the case, there is no justification for addition of Rs. 11.25 crores on the basis of documents found and seized from 3rd party namely Sh. Sanjeev Mahajan as a result of search u/s 132(1) without recording satisfaction u/s 153C by the AO of Sh. Sanjeev Mahajan in order to consider any such addition in the case of the appellant.
7 3952 & 3953/D/2012 & CO Nos. 138 & 139/D/2013 2. That addition of Rs. 11.25 crores is illegal, arbitrary and without jurisdiction as same is in total disregard to provisions of sec. 153C of the Income Tax Act, 1961 and scheme of the Act.
E. Grounds of CO No. 139/D/2013:
1. 1. That on the facts and circumstances of the case, there is no justification for addition of Rs. 5.35 crores on the basis of documents found and seized from 3rd party namely Sh. Sanjeev Mahajan as a result of search u/s 132(1) without recording satisfaction u/s 153C by the AO of Sh. Sanjeev Mahajan in order to consider any such addition in the case of the appellant.
2. That addition of Rs. 5.35 crores is illegal, arbitrary and without jurisdiction as same is in total disregard to provisions of sec. 153C of the Income Tax Act, 1961 and scheme of the Act.
We deem it appropriate to first take up the CO’s of the assessee and then the appeals will be taken up on merits, if so required.
5.The Ld. AR submitted that it is evident that the AO has made addition on mechanical basis even without making necessary enquiries from Sh. Sanjeev Mahajan. It was submitted that in this case the proceedings u/s 153A are illegal and without jurisdiction as there is no reference to any seized document found from the possession of the assessee or belonging to the assessee in the context of undisclosed income. In fact, in the assessment order from the possession of the assessee for the purpose of any addition and whole basis of addition is in the context of seized annexure found from Sh. Sanjeev Mahajan during the course of search and AO has considered the said annexure in the case of assessee for the purpose of addition, without properly appreciating the nature of seized annexure or without proper investigation and examination of the concerned parties. It was also submitted that the AO has wrongly considered and applied the said seized annexure of Sh.
Sanjeev Mahajan in the case of appellant even though no satisfaction has been recorded u/s 153C by the AO having jurisdiction over the case of Sh. Sanjeev Mahajan and it is evident that the above referred seized annexure has no relevance to the assessee and has been considered and applied merely for the purpose of addition in the case of assessee. If the AO proposed to consider the said seized annexure in the case of assessee, the concerned AO should have recorded the said satisfaction in the context of provision of sec. 153C. As per assessment order, there is no reference to any such satisfaction and as such impugned assessment is illegal, arbitrary and without jurisdiction.
It was further submitted that the alleged seized annexure has no relevance to the assessee as various cheque transactions in the said annexure are between other parties as per details given in the Assessment Order itself. The general reference to Citi Mart Hotel Project with the assessee is also factually incorrect and without any basis. It was submitted that the Assessing Officer has not properly considered the relevant facts and provisions of section 153A and 153C of the I.T. Act. These are search related proceedings and provisions of section 153A and 153C are applicable only relating to any undisclosed income on the basis of seized documents found as a result of search. No such documents have been found in the case of assessee and even the referred seized annexure found from the possession of Sanjeev Mahajan does not belong to or is relevant to the assessee. It was submitted that the assessee is not the owner of hotel in Citi Mart Project and as such the question of sale or consequential receipt does not arise. The Assessing Officer has not even addressed the basic fact about the ownership of hotel, sale thereof and consequential capital gain. It is self evident that no such satisfaction has been recorded or it is not even the case of submitted that the Assessing Officer has made reference to various facts in a highly arbitrary manner and out of context. It is not the case of Assessing Officer that cheque payment referred to in the seized annexure was received by the assessee from Sh. Sanjeev Mahajan and as such a part of the seized annexure has wrongly been attributed to the assessee merely for the purpose of addition of alleged cash payments. Even though it was clarified that the alleged hotel property does not belong to and owned by the assessee, the Assessing Officer has not examined the issue of ownership of hotel property or brought any corroborative evidence on record regarding the ownership of the assessee with the said property or the context in which the said annexure was considered in the case of the assessee. It was submitted that in fact the Assessing Officer himself had issued show-cause notice to M/s Nimitya Hotel & Resorts Pvt. Ltd. in the context of cash transactions on the basis of very same seized Annexure. In fact, the Assessing Officer had already initiated reassessment proceedings u/s 148 in the case of Nimitya Hotel & Resort (P) Ltd. It was submitted that i is very important to take note of the fact that in the show cause notice issued to M/s Ram Mehar years 2008-09 and 2009-10, the assessing officer has specifically made reference to alleged cash payment to M/s Nimitya Hotel &
The Ld. DR placed reliance on the order of the AO.
We have heard the rival submissions and perused the relevant material on record. The contention of the assessee is that the mandatory satisfaction note, which is to be recorded by the A.O. of the searched party during the course of the assessment proceedings of the search party for assuming jurisdiction u/s 153C of the Act by the A.O. of the assessee, was not recorded. The Ld. DR could not controvert these factual submissions of the assessee. He could not produce proof to demonstrate that the satisfaction has been recorded by the A.O. of the searched party. Thus, the A.O. who is having the jurisdiction of the searched party, has admittedly not recorded satisfaction note, as mandated by law enabling the A.O. of the assessee to assume jurisdiction u/s 153C of the Act. We find that the Hon'ble Jurisdictional High Court in 510 and Mandir P.Ltd. vide its judgment dated 28th July, 2015 has at Paras 7 and 8 held as under:
7. Secondly, as far as the facts of the present case are concerned, the Revenue has placed no material to challenge the following factual finding recorded by the ITAT in paras 5, 7.1 and 8 of the impugned order. 5. ............ Information obtained by Ld.A.R. from A.O. of searched persons as placed at paper book pages 34- 38 clearly mentions that the satisfaction note with respect to other entities was not available/recorded by A.O. of searched person and further on the direction of Ld.D.R., A.O. Central Circle-17, written to Ld.D.R. vide letter dt. 9.9.2014 wherein he had mentioned to have enclosed satisfaction note recorded by the A.O. of such other person. The copy of satisfaction note enclosed with the letter was prepared by A.O. of other entities who had assumed jurisdiction by invoking provisions of S.153 C......
7.1. We observe that on the basis of replies obtained by assessee under RTI and on the basis of reply of A.O. Central Circle 21, to Ld.D.R. the satisfaction note dated 10.9.2010 is the satisfaction note prepared by A.O. of the other persons. This fact is further fortified from the fact that on the same day of recording satisfaction on 10.9.2010, the AO had raised notices, u/s 153C of the Act as placed in paper book page 1.
8. The Revenue has not placed any material to dispute the factual finding of the ITAT that the requirement of the law explained by this Court in Pepsi Foods regarding the recording of satisfaction by the AO even in respect of the searched person was not fulfilled. Consequently, the fact
13 3952 & 3953/D/2012 & CO Nos. 138 & 139/D/2013 that it was the same AO both for the searched person and the assessee makes no difference to the consequence of non- compliance with the legal requirement regarding the recording of satisfaction. The Court also agrees with the ITAT that even if the AO were the same, satisfaction would have to be recorded separately qua the searched person and the assessee."
Respectfully following the Hon'ble Jurisdictional High Court judgment cited above, we quash the assessment orders for AY 2007-08 and 2008-09 and dismiss all the appeals filed by the Revenue. The Cross Objections of the assessee are allowed. As far as AY 2009-10 is concerned, the Department has preferred an appeal (ITA No. 3953/Del/2012) against the order of the Ld. CIT(A) but the assessee has not filed any CO for this year. However, as the entire assessment proceedings in AY 2009-10 also have been based entirely on the seized annexure A-1 for which the Ld. CIT (A) has given a categorical finding as not belonging to the assessee, in view of our allowing the CO of the assessee and quashing the assessment proceedings for AY 2007-08 and AY 2008-09, we find no reason to interfere with the findings of the Ld. CIT (A) and also.
In the final result the Cross Objections of the assessee are allowed and all the Revenue appeals are dismissed.
Order is pronounced in the open court on 30.06.2016