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Income Tax Appellate Tribunal, DELHI BENCH “F”: NEW DELHI
Before: SHRI H.S.SIDHU & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This appeal is filed by the assessee against the order dated 20.03.2013 of the ld. CIT(A)-II, New Delhi for the Assessment Year 2009-10 where in solitary ground raised as under :- “The Ld. CIT (A) erred in facts and in law confirming the addition of Rs. 1,40,78000/- which is not only bad in law but also against the facts and circumstances of the case.”
2. On 04/04/2016 the assessee has moved a prayer for admission of additional ground of appeal:- “That in law the Ld. AO erred in framing the assessment u/s 143 (3) relying on documents seized in a search on a 3rd party without satisfaction under section 153C and without issue of notice under section 153A .”
3. It was submitted that a dumb document was seized from the premises of a third party, the Ld. assessing officer has completed the assessment proceedings under section 143 (3) instead of u/s 153A rws 153C of the act. He stated that it is the root cause of the addition and ground is legal in nature. He further stated that no fresh facts are required to be looked into to decide Phoenix Data Tech Services Private Limited V DCIT Central Cicrle -17 New Delhi A. Y. 2009- Page 2 of 10 the above ground of appeal
. Therefore,this ground of appeal should be admitted and adjudicated.
4. Ld. Departmental representative objected to the admission of additional ground submitting that there is no error in the order passed u/s 143(3) of the act by the AO, which is confirmed by the Ld. CIT (A). He further submitted that assessee has not taken this objection before the Ld. AO as well as before the Ld. CIT (A) and therefore at this stage this ground of appeal should not be admitted.
5. We have carefully perused the prayer of the assessee for admission of additional ground of appeal. It is apparent that this ground of appeal is purely legal in nature and does not require any further facts to be adduced by both the parties. In view of this, we admit additional ground of the appeal for adjudication.
6. The brief facts of the case are that appellant company is a private limited company engaged in the business of real estate. The facts noted by the Ld. assessing officer that in this case,the investigation wing conducted survey u/s 133A on 20 of October 2008 and pursuant to survey, notices under section 142 (1) and 143 (2) dated 24/09/2010 were issued. In response to these notices, the assessee filed copy of the return already filed by it. The reason for the survey conducted on the assessee was that it has an interconnected business activity with „M/S Thapar Home‟ group of cases, which was, searched on the same day u/s 132 of the Income Tax Act. During the course of search at place of one of the director of the group loose paper being page No. 1 and 2 of Annexure A – 12 was impounded. According to ld. Assessing Officer, these pages contained details of the area booked by various concerns in one project where the appellant along with two other companies were developers, showing square feet, rate per square feet, amount in cash, amount by cheque and balance amount. According to the AO, the parties who booked the area are dummy concerns of M/s Thapar home group, and these parties were held to be bogus entities engaged in huge capital formation operated by Mr. . B K Dhingra. During the course of assessment proceedings, the assessee denied any financial implication of the seized document stating that these pages are not pertaining to the assessee company and do not have any business relationship with the person searched from whom paper is impounded. It was further stated that that the premises wherefrom the document seized also does not belong to it. Learned AO rejected the contention of the assessee. According to him, seized document is a chart showing names of 66 parties and against their name area booked in square feet, rate per square feet and total advance payment is mentioned. Next columns shows amount in cheque, cash, cheques issued and balance amount. On analysis of that chart, total amount was of Rs. 16775000/-which Phoenix Data Tech Services Private Limited V DCIT Central Cicrle -17 New Delhi A. Y. 2009- Page 3 of 10 was not shown as receipt, ld. AO added it as unexplained cash credit. A further sum of Rs. 1 lakh was added as from Shri Sethia Rs. 55 Lacs were received and accounted is only Rs. 54 lakhs. Some further petty additions with respect to the preliminary expenses were also made and consequently the total income was assessed at Rs. 1,68,08,860/- u/s 143(3) of the Act.
7. Appellant assessee aggrieved with the order of the Ld. AO preferred an appeal before the Commissioner of Income Tax (Appeals). Before the Ld. CIT (A), Assessee submitted that the addition was made on surmises and conjectures. Shri BK Dhingra was the third party who had no connection with the appellant that as per heading of the chart seized it merely listed parties „taking interest in the residential projects‟. He submitted there is no signature of the director/ shareholder on it. Therefore, burden of proof rests with the revenue. He further submitted that no cheques were ever transacted as per the bank statements as the counterfoils of chequebook seized by the Income tax department. Assessee filed fresh confirmation from 41 parties as additional evidences under rule 46A citing insufficiency of time before the Ld. AO. The Ld. AO submitted the remand report on 25th of May 2012 in response to which the assessee filed rejoinder on 17/12/2012. Based on the above facts and circumstances the Ld. CIT (A) decided the issue against the assessee confirming the addition of Rs. 1,40,78,000/-. Reasons given for confirming the addition by ld. CIT (A) that noting on the pages are not projections but record of real events. According to him counterfoil of the chequebook is a basic and primary record created by the drawer of the cheque immediately upon writing of the cheque since the entry of six cheques in the counterfoil corroborate the six entries recorded under the column 6 in the seized chart. Further provisions of section 292C of the Act, which raises the presumption about the correctness of the contents of the seized documents and according to him as the transaction made by the cheque is corroborated by the primary document comprising the counterfoils of chequebooks that were seized from the residence of the director of the Thapar group of company. This according to him was sufficient to establish the correctness of the rest of the document. On confirmation, he stated that the Ld. AO correctly rejected them without carrying out the requisite verification, as those were identical even in their punctuations.Therefore, according to him it was obvious that all the parties including the appellant company are closely connected to one another and in the circumstances when there are clear nexus of the transaction the confirmation obtained by the assessee would be meaningless and futile. He therefore held that non-issue of summons or notices to examine the parties was justified.
Against the order of the Ld. CIT (A), the assessee is in appeal before us as per solitary ground of appeal
as well as additional ground raised. Phoenix Data Tech Services Private Limited V DCIT Central Cicrle
17. New Delhi A. Y. 2009- Page 4 of 10 9. Ld. AR firstly pressed additional ground stating that in law, the Ld. AO has erred in framing the assessment u/s 143(3) of the act relying on documents seized in a search on a third party without satisfaction u/s 153C and without issue of notice u/s Section 153A . Before handing over seized documents etc., to AO of 'other person', a 'satisfaction' has to be recorded by AO of person searched that document belong to 'other person' and recording of such satisfaction is an essential and prerequisite condition for bestowing jurisdiction on to AO of 'other person'. Even if AO of searched person and such other person is same, he has to carry out dual exercise, first as AO of person searched and thereafter in capacity of AO of such other person, in which he has to issue notice u/s 153A, rws 153C. Further satisfaction must be an objective satisfaction based on an enquiry by AO to establish that documents referred to in section 153C belongs to a person other than person searched. The revenue has not done all these mandatory exercise and despite the seized documents; ld. AO has made assessment u/s 143(3) of the act. Therefore he submitted that assessment order passed u/s 143(3) of the act based on seized material which has come in to possession of ld. AO is bad in law and he should have carried out assessment proceedings in accordance with section 153C of the act.
10. On the merit of the addition, he submitted that the 3 companies have jointly purchased agricultural land at village Gharauli Gurgaon, in financial year 2007 – 08 and after amendment to the master plan of Gurgaon the revised application for grant of license was made and the authorities have granted the license only in financial year 2012 – 13.Therefore, there is no such project in existence at that time and no one will pay in FY 2008-09 for which project that has not started even in FY 12-13. He further submitted that along with the search under section 132 conducted on Thapar group on 28th of October 2008 survey under section 133A was also carried on in the business premises of the assessee however during the course of survey no incriminating material has been found which can corroborate the seized document allegedly found from Shri B K Dhingra. He further submitted that during the search of the business premises of Shri B K Dhingra an unsigned computer printout was seized with which assessee does not have any connection as it neither belong to it , even otherwise there are no transactions taken place as counterfoils of the cheques unless transacted in bank does not have any value. He further submitted that the document itself says that these are the details of parties showing interest in the residential project. The transaction even otherwise has not taken place as confirmed by the 41 parties. During the course of the appellate proceedings before the Ld. CIT (A) this confirmations were brushed aside without any reason and on flimsy grounds. He further submitted that that the alleged document, which was relied upon by the revenue, was seized from the third party and it is the Phoenix Data Tech Services Private Limited V DCIT Central Cicrle -17 New Delhi A. Y. 2009- Page 5 of 10 duty cast upon the revenue to state that these transactions have really taken place and the money involved there in constitute the undisclosed income of the assessee. In fact, there is no evidence found by the revenue and infact, all those cheques were never encashed in the bank account of the assessee. He further submitted that decision of Honourable Delhi high court relied up on by the Ld. CIT (A) is also not relevant as that was the case of the partnership firm and not of private limited company and where the statement of partner was taken , in this case there is no statement of any person connected with the company is taken at all. In view of the above facts his contentions were that that the assessing officer should have made an assessment under section 153C of the Income Tax Act and not under section 143 (3) of Act. On the merit, there are no evidences of undisclosed income of the appellant.In the end, on the both the issues of the merit as well as on the additional legal ground,appellant submitted number of judicial precedents to buttress the claim.
The Ld. departmental representative submitted that that the legal ground placed before the Hon‟ble ITAT, appellant has not raised before the CIT (A) and therefore the matter may be set aside back to the file of the Ld. CIT (A) to decide that ground. He submitted that the assessee has not objected the issue of the order u/s 153C before the Ld. AO and therefore now it cannot raise this issue before the tribunal. On the merits of the case, he mainly relied on the orders of the Ld. AO and Ld. CIT (A) stating that that the plea of the assessee that the transactions are yet to be entered into is not correct. Therefore, he submitted that that ld. AO has rightly made the addition and confirmed by the CIT (A) and therefore it maybe upheld.
We have carefully considered the rival contentions and perused the orders of the lower authorities and the document seized. We have alreadydiscussed the brief facts of the case above. Both the issues on legal aspects as well as on merits of the addition are dealt with as under :- 13. On legal issue, admittedly, assessment has been framed by the ld. AO u/s 143(3) of the act and whole addition has been made based on seized document being page 1 of Annexure A- 12 impounded from the premises situated at 604, tower – IIA, Rajender Palace, New Delhi during search on Thapar homes group of cases. Therefore, apparently,impounded material received by Ld. AO is in case of search on third party and he was of the view that documents belong to the assessee and it has a bearing on the determination of the total income of the appellant. With effect from 1stJune 2003, provisions of section 153A to 153C enacted, which covers the new scheme of search assessments. Accordingly, where the assessing officer is satisfied that any books of account or other documents seized in search pertains to person or any information contained therein relates to person other than the person searched, Phoenix Data Tech Services Private Limited V DCIT Central Cicrle -17 New Delhi A. Y. 2009- Page 6 of 10 then the books of accounts etc. or seized documents shall be handed over to the AO having jurisdiction over such other person. On receipt of such information, AO shall proceed against such other person and issue notice and assessee or reassess the income of the other person in accordance with the provisions of section 153A. For this further condition is that AO satisfies that the document stated etc have a bearing on the determination of the total income of such other person for the relevant assessment year. Then provisions of section 153A rws 153C of the Income Tax Act govern assessment. In context of these provisions in the present fact, it is apparent that that impugned documents were found during the course of search on third party, which has been received by the ld. AO. Now ld. AO is duty bound to record his satisfaction about seized documents having bearing on the income of the assessee. After that, he has to proceed to assess the income of the assessee according to section 153A of the Income tax Act.The Assessing officer is empowered to assess six assessment years immediately preceding the assessment year relevant to the previous years in which search takes place. In this case, Search was conducted on 20-10-2008, previous year is F Y 2008-09 and AY 2009-10, and therefore impugned assessment year is outside the purview of section 153A of the Act. In view of this the additional ground raised
by the Appellant with respect to applicability of section 153C and all other consequent issues are rejected and assessment u/s 143(3) in the present case is upheld. Therefore, additional ground of appeal of the appellant is dismissed.
14. Coming to the merits of the case, it is necessary to analyses the document seized, certified copies of which are placed on record by the parties. It is a chart accompanied with the counterfoils of cheque books of some of the companies named in the chart. Firstly we analyze the chart which is a computerized statement found from the premises of shri B K Dhingra. This chart has 12 columns. On the top of the chart the name of three companies are mentioned i.e. (1) Prime Infoways private Limited, (2) Prime IT solutions P Limited, (3) Phoneix dataTech Services private Limited (Appellant). These chart further states the names of 66 companies. There it is mentioned „ names of the parties in whom favors cheques are to be issued‟ . Further on that chart below on top also shows the names of the above three companies purportedly written in acronyms and below that square feet and area converted in to square meter is mentioned. Then the details of 66 parties are mentioned showing area booked, rate per square feet, total advance payment, then there is bifurcation between above three companies including appellant of the square feet area, next column shows amount of cheque , amount in cash and cheques issued, balance. Subsequent documents shows the cheque book counterfoils of six companies where in the counter foils of cheque books were Phoenix Data Tech Services Private Limited V DCIT Central Cicrle -17 New Delhi A. Y. 2009- Page 7 of 10 found showing issue of cheques in the name of appellant and other two entities. Namely in case of party no. 1 listed in the statement is Akshya Aroogya mandir private limited from cheque book counterfoil with kotak Mahindra Bank Limited shows issue of cheque in the name of appellant of Rs 9,60,000/-. Further in case of party no 18 Micron steels limited , this companies cheque book counter foil with kotak Mahindra bank shows that a cheque of Rs 3,60,000/- is issued to the one of the three companies. Similarly, in case of three more companies such counterfoils of chequebooks were seized. Based on these evidences the addition is made by the Ld. AO and confirmed by the CIT (A). The seized documents vis a vis the reasons for addition are examined as under :- i. Above documents are not seized from the premises of the assessee but at the premises of third party who is neither the director nor the shareholder of the company. However neither the ld. AO as well as The Ld. CIT (A) has led any evidence that though the paper shows the names of the appellant along with two other companies but these papers are found from the third party i.e. Shri B K Dhingra and how is he associated with the appellant. Ld. CIT (A) has stated that Shri B K Dhingra is a close associate of Shri I M Thapar . Merely an assertion that somebody is close to one of the director cannot become the close associate of the appellant company itself. Ld. AO has not led any evidence that Shri Dhingra looks after the affairs of the company in any manner. the evidence of actual transaction of those parties and it is unaccounted income of these companies.. ii. On 20.8.2008 search on Thapar Homes Group as well as survey on the assessee were carried out. Admittedly, during the course of search the charts as well as the counterfoils of the chequebooks were found from Shri B K Dhingra. However, during survey no evidences with respect to the projects whether in existence or not for which the statement is found, whether the counterfoils of cheques, which were relied up on whether cleared in the bank, account of the appellant were examined. Appellant has submitted that the there is no such project, assessee received no such booking and no such cheques were received in the bank account of the assessee. Revenue has not controverted this fact. As the said cheques have not at all been received by the assessee, merely because in the counterfoil of the chequebook of issuing party, name of the appellant is mentioned, it cannot result in to addition in the hands of the assessee unless it is cleared in the bank account of the appellant. Phoenix Data Tech Services Private Limited V DCIT Central Cicrle -17 New Delhi A. Y. 2009- Page 8 of 10 iii. During assessment the appellant was not confronted with the statement of the person from whose possession these chart and also the counterfoils of the cheques of six companies were found. In fact, there is no averment in the order that any such statement is in possession of revenue. iv. Furthermore the name of all the parties in that particular statement wherein bookings in the name of those parties have been shown, appellant has filed confirmation of those parties stating that they have not booked any such premises and also apparently no payment have been made. On these confirmation ld. AO has neither issued any summons to those parties nor examined their bank statement about the issue of those cheques and whether these cheques have been cleared or not. The assessing officer and CIT (A) have brushed aside those confirmations as meaningless. In fact,on examination of those confirmations, reality of the reason for writing counterfoils of the chequebooks in the name of appellant and two other companies would have been known to revenue . The reason why those cheques were issued but were never came in to the bank accounts of the appellant and whether they are really handed over to the appellant company is also not known to revenue. It is an uncontroverted facts that those cheques remaining non-transacted. Contrary to that appellant has discharged its onus by producing the confirmation of those parties that they have neither booked any premises with the appellant company and therefore have not paid any sum. v. It is the allegation of the revenue that these companies are the bogus companies floated by one Shri B K Dhingra and they are used for capital formation activities. This fact merely remains a conjecture and surmises in absence of any evidences led by revenue against that person i.e. Shri B K Dhingra and his connection with the appellant company. Merely making an assertion that Shri B K Dhingra is entry operator or the companies are formed for capital formation remains unsubstantiated allegation unless there are any evidences such as assessment orders etc of entry operator or the assessment orders of those companies operated by him. vi. Further assuming that those companies are the bogus companies, and then on looking at the chart we found that there are columns of „cash‟. If these amounts are the bogus amount introduced by the appellant company then we Phoenix Data Tech Services Private Limited V DCIT Central Cicrle -17 New Delhi A. Y. 2009- Page 9 of 10 failed to understand that how the cash is also be received from those companies, whereas in general only commission is required to be paid to the entry provider and no cash is receivable from them. vii. Further, it remains uncontroverted that there was no project in the name of the appellant in impugned assessment year as there was no permission also. The facts of the acquisition of land are submitted by the Ld. AR and also stated the status of the project , which is not controverted. It is highly unlikely that the builder who is not the line of the developer for considerable time would get such kind of bookings. All the counter foil of cheques showed dates of March 2008. viii. Further Ld. CIT (A) drew support from the provision of section 292C of the act. That provision applies in case the documents are found from the possession of the person then the presumption arises against that person. According to us, the reliance on it is unfounded as there are no documents found from the possession of the assessee or at the premises of the assessee. It was found from Shri B K Dhingra who has no business relationship with the appellant company. ix. Ld CIT (A) has held that details mentioned in the chart are not projections but actual transactions. This assertion of Ld. CIT (A) is also not supported by evidences because in those circumstances the cheques issued by those companies should have been reflected in the bank statements of the appellant companies. It is unassailed that these cheques have never been credited in the bank account of the appellant company. x. Ld CIT (A) relied on the decision of Honourable Delhi High court in case of CIT V Sonal Constructions 28 taxmann.com 127 (del for calculations shown in the documents. In the present case as the project is nonexistent, the cheques are not credited in the bank account of the appellant, the confirmation of the parties that the y have not made any bookings and have not paid any sum to the appellant company, the facts of that case are distinguishable.
15. In view of the above reasons, we reverse the finding of the ld. CIT (A) in confirming the addition of Rs 14078000/- in the hands of the appellant on account of booking sums allegedly received from those parties. In the result, solitary ground raised in the appeal is allowed.