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Income Tax Appellate Tribunal, DELHI
Before: SH. ANIL CHATURVEDI & SH. SANJAY GARG
Consolidated Appeals (5)
These five appeals of which four appeals filed by the assessee and one appeal filed by the Revenue are directed against the order dated 15.01.2013, 17.12.2012, 07.05.2018, 31.05.2018 & 17.12.2012 of the Commissioner of Income Tax (Appeals)- XXXIII & 30 New Delhi relating to Assessment Years 2006-07 & 2007-08.
2 2. Before us, Learned AR submitted that the issues raised in Appeal Nos.2311/Del/2013 & 1769/Del/2013 of the assessee are identical and the Appeal No.1676/Del/2013 raised by the Revenue for A.Y. 2007-08 are interconnected. He further submitted that the Appeal Nos.4789/Del/2018 & 5112/Del/2018 are with respect to penalty on the quantum additions. He submitted that all the appeals can be considered together. Learned DR did not controvert the submissions made by AR. We therefore for the sake of convenience proceed to dispose of all the five appeals by a consolidated order but for the sake of reference refer to the facts for A.Y. 2006-07.
The relevant facts as culled from the material on records are as under :
Assessee is a company belonging to BPTP Group which is stated to be engaged in the business of real estate. A search and seizure action was carried out on BPTP Ltd. and some of its Group Companies on 15.11.2007. On the basis of certain documents seized during the course of search and seizure action and on the basis of post-search enquires made, it was noted that the group companies of BPTP Group was following a business model as a part of which only part payments of the sale consideration in respect of land purchased were paid at the time of execution of the sale-deed and the payments of balance sale consideration was invariably made through post dated cheques (PDCs) and for the intervening period i.e. period between the date of sale deed and the date of encashment of PDCs, interest was 3 paid in cash to the vendors of the land on monthly basis @ 1.25% p.m. on the amount of PDCs and the cash payment of interest was not accounted for in the books of account. AO has noted in the order that assessee had also purchased a large chunk of land during the Financial Year 2005-06 and following the same modus operandi, had paid interest in cash to the vendors of the land on monthly basis @ 1.25% p.m. on the amount of PDCs and the aforesaid cash payment of interest was not accounted for in the books of accounts. To assess the aforesaid escaped income notice u/s 148 of the Act was issued on 29.03.2010 which was duly served upon the assessee. In response to the aforesaid notice, assessee filed its return of income for A.Y.2006-07 on 22.04.2010 declaring total income at Rs.1,29,365/-. The case was taken up for scrutiny and thereafter assessment was framed u/s 143(3) r.w.s 147 of the Act vide order dated 24.12.2010 and the total income was determined at Rs. 86,23,480/-. Aggrieved by the order of AO, assessee carried the matter before the CIT(A) who vide order dated 15.01.2013 in Appeal No.481/10-11/386 granted partial relief to the assessee. Aggrieved by the order of CIT(A), assessee is now in appeal before us and has raised the following grounds of appeals in “1. That on the facts and circumstances of the case and in law the CIT(A) erred in rejecting appellant's contention that assessment order made by Assessing Officer was bad in law and void ab- initio on the ground that it ought to have been made u/s 153C of the Income Tax Act, and not, as was done u/s 143(3)/147 of the Income Tax Act.
2. That without prejudice, on the facts and circumstances of the case and in law, the CIT(A) erred in upholding the assumption of jurisdiction u/s 147 by the Assessing Officer and in making the assessment in pursuance thereof, without dealing with appellant's objections on merits.
2.1 That the CIT(A) having given a finding that no seized material obtained from the search of BPTP Group of cases (no search having been made on the appellant) belonged to the appellant, clearly erred in yet upholding the action u/s 147 taken in the hands of the appellant based on such seized material.
3. That on the facts and circumstances of the case and in law the CIT(A) erred in holding to quote, 'that seized documents definitely proves that interest is paid on PDC' despite- i. that the seized record on the basis of which above finding was given, even according to his own finding by the CIT(A), did not belong to the appellant and, ii. that no enquiries were made from any of the alleged recipients of the interest and none was confronted with relevant document(s).
3.1 That the finding of the CIT(A) is based on mere surmises and conjectures without proof and corroboration by independent evidence. 3.2 That without prejudice the CIT(A) erred in upholding the addition of interest for the period for which PDC's were extended. 3.3 That without prejudice the CIT(A) erred in not quantifying the addition and instead giving ambiguous directions to compute the interest after six months from the date of sale.
4. That on the facts and circumstances of the case and in law the CIT(A) erred in not accepting the appellant's contention that Additional Payments having not been claimed as deduction by appellant, no disallowance could have been made in the hands of the appellant. 4.1 That without prejudice the CIT(A) erred in upholding the disallowance of Additional Payments made to the recipients who were not the owners of land and to the payment made in cash. 4.2 That without prejudice the CIT(A) erred in not himself quantifying the addition to be made. 4.3 That without prejudice the CIT(A) did not deal with the following specific ground No.4.1:- "4.1 That the learned Assessing Officer has erred in making an addition of Rs.35,81,937/- on account of additional payment as recorded in books of account of appellant company as against amount of Rs.8,66,000/- paid on 5 account of additional payment and recorded in books of accounts.” 5. That on the facts and circumstances of the case and in law the CIT(A) erred in upholding the disallowance u/s 40A(3) in respect of which no deduction was claimed by the appellant. 5.1 That even on merits the disallowance was not justified.
That the orders passed by the Assessing Officer and Commissioner of income Tax (Appeals)-XXXIII, New Delhi are bad in law and void ab-initio.
The appellant craves permission to add, amend, alter or vary all or any grounds of appeal on or before the date of hearing of the appeal.”
5. Vide Ground No.1, assessee is challenging the impugned assessment.
6. Before us, Learned AR submitted that a search u/s 132 of the Act was carried out on 15.11.2007 on BPTP Ltd. and other Group Companies but no search was carried out on the assessee. He submitted that the assessment in the case of the assessee has been made u/s 143(3) read with section 147 of the Act. He submitted that a basic objection was taken before the CIT(A) against the assessment framed u/s 143(3) of the Act by utilizing the material seized in the course of search conducted on 15.11.2007 on the BPTP and the Group Companies and some of which belonged to the assessee. It was submitted before the CIT(A) that in such a situation when the material belonging to assessee was found during the course of search of third party, it was mandatory on the part of the AO to make assessment u/s 153C of the Act, as against the assessment made u/s 143(3) r.w.s 147 of the Act. In support of his contention that the addition has 6 been made on the basis of material found during search at third party, Learned AR pointed to Para 2.2.2 of the order wherein the AO makes reference to the various seized documents based of which additions has been made in the hands of the assessee. Learned AR submitted that the utilization of the documents which belong to the assessee and which were seized in the course of search u/s 132 of Act on BPTP Ltd. and its Group companies was not permissible in the assessment made u/s 143(3) of the Act and in that situation, the assessment should have been framed u/s 153C of the Act. He submitted that the lower authorities have used the seized documents and various other documents which belongs to various other companies for reaching to adverse conclusion against the assessee and for making additions. He submitted that the AO without following due procedure of law of recording satisfaction before invoking provision of section 153C of the Act has used seized material which has vitiated the assessment proceedings. He therefore submitted that the assessment order passed u/s 143(3) of the Act after using seized documents needs to be quashed. He further pointed that the same CIT(A) in the case of other group companies had annulled the assessments in similar circumstances. The reason for annulling the assessment was that the assessments in those cases was made by utilizing the seized documents seized u/s 132 of the Act and therefore the assessment should have been framed u/s 153C of the Act and not u/s 143(3) of the Act. He further submitted that on identical facts in the case of one of group company namely, Glitz Builders & Promoters Pvt. Ltd., and on identical facts, assessment made by same assessing officer u/s 7 143(3) of the Act was quashed by the Co-ordinate Bench of Tribunal in order dated 27.01.2021. He pointed to the copy of the aforesaid order placed in the paper book. He pointed that the assessment order framed in the present case is also identical to that of Glitz Builders & Promoters Pvt. Ltd. (supra). He therefore submitted following the decision of the Co-ordinate Bench rendered in the case of Glitz Builders & Promoters Pvt. Ltd. (supra), the impugned assessment needs to be quashed.
7. With respect to the Appeals No.4789 & 5112/Del/2018, he submitted that those appeals are with respect to the penalty levied on the additions made by AO. He submitted that if the assessment itself is set aside then there remains no question of levy of penalty u/s 271(1)(c) of the Act.
8. As far as Department’s appeal in A.Y. 2007-08 is concerned, he submitted that the Department is aggrieved by the relief granted by CIT(A). He submitted that if the assessment itself is quashed then the appeal of Revenue would also will have to be dismissed. He further submitted that if assessment itself is set aside, the other grounds raised by the assessee would rendered academic and will not require any adjudication.
9. Learned DR on the other hand did not controvert the submissions made by Learned AR but however pointing to the findings of CIT(A) supported the order of CIT(A).
8 10. We have heard the rival submissions and perused the materials available on record. Assessee before us is challenging the assessment framed by the AO u/s 143(3) r.w.s 147 of the Act. Before us, it is assessee’s submissions that a search and seizure action took place in BPTP Group and its Group Companies on 15.11.2007. On the basis of the documents seized during the course of search and post-search enquiries, the addition has been made in the case of the assessee. It is an undisputed fact that the assessee was not covered under the search action u/s 132 of the Act. It is thus the case of the assessee that no addition could be made u/s 143(3) r.w.s 147 of the Act on the basis of the materials seized during the course of search and the proper course of action for framing the assessment by the AO was to proceed on the basis of the provisions of Section 153C of the Act as the incriminating material that has been relied upon by the AO for making additions belongs to the assessee. We find that identical issue arose in the Group Co. of the assessee namely Glitz Builders & Promoters Pvt. Ltd. (supra) before the Co-ordinate Bench of Tribunal. The Co-ordinate Bench of Tribunal in order dated 27.01.2021 quashed the assessment framed u/s 143(3) by holding that the additions made on the basis of the document which belongs to the assessee could not be made in the assessment framed u/s 143(3) of the Act but the AO should have invoked the provision of Section 153C of the Act which is mandatory. The relevant findings of the Tribunal read as under: “13. We have carefully considered the rival contentions and orders of the learned that lower authorities. Admittedly, assessment in challenge before us has been passed under 9 the provisions of Section 143 (3) of the income tax act. According to provisions of Section 153C of the act, it is provided that where the assessing officer is satisfied that any books of accounts and documents seized or requisitioned belongs or belong to a person other than the person referred to in Section 153A, and then AO shall proceed to assessee person according to the provisions of chapter XIV of the act. We first examine the issue whether any material belonging to the assessee was found during the course of search or not. The page number 14 of annexure A – 1, which is placed at page number 15 of the paper book, is a copy of post dated cheque issued by the assessee in favour of “ Jagdev Alias Jaggi” bearing cheque number 199323 dated 10/11/2006 which was renewed for twice. The cheque number 479405 of Citibank also issued another cheque in the same name. Another cheque is also found on the same page in favour of Mr. Sohanpal. Based on these cheques (post dated), the addition has been made in the hands of the assessee. Therefore, it is apparent that a copy of the cheque issued by the assessee in favour of the third party found from the premises of altogether a different party naturally belongs to the assessee. The original cheque belongs to the person in whose name such act is drawn and further a copy of such cheques belongs to the person who issued them. Therefore, naturally the documents belonging to the assessee were found from the premises of the third party during the course Of Search. Based on these documents the additions are made in the hands of the assessee. Therefore, the only option available with the assessing officer is to proceed u/s 153C of the act. We find that in para No. 6.3 of the order of the ld. CIT (Appeals) he has dealt with seized materials starting from page No. 8 to page No.
Further, the ld. AO after recording all the seized material in the body of the assessment order stated that there are number of other seized documents, which proves that assessee has made payment of interest to the beneficiaries. In para 2.4 of the assessment order also the ld. AO noted that though assessee has denied that there are no incriminating documents seized for payment of interest on post dated cheques, the ld. AO has materially tabulated that there are incriminating documents in the form of post dated cheques based on which the addition is made. Some of these cheques are found during the course of search in case of a third party. Therefore, apparently the assessment is required to be made under the provisions of Section 153C of the act.
Before us, Revenue has not pointed to any distinguishing feature in the facts of the case in the year under consideration and that in the case of Glitz Builders & Promoters Pvt. Ltd. (supra). Revenue has also not placed any material on record to demonstrate that the Tribunal order in the case of Glitz Builders and Promoters Pvt. Ltd. (supra) has been stayed/ set aside/ overruled by higher judicial forum. We therefore, following the reasoning given by the Co-ordinate Bench of Tribunal in the case of Glitz Builders and Promoters Pvt. Ltd. (supra) and for similar reasons hold that the impugned assessment to be without jurisdiction and therefore the same are quashed. Since we have quashed the assessment order, the other grounds raised by the assessee on merits does not require any adjudication and therefore the same are not adjudicated. In the result, the appeal of the assessee for A.Y. 2006-07 is allowed.
Before us, both the parties have submitted that the issues involved in A.Y. 2007-08 are identical to that of A.Y. 2006-07. We have for the reasons stated hereinabove while deciding the appeal for A.Y. 2006-07 have quashed the assessment. We for the similar reasons also quash the assessment for A.Y. 2007-08. Since we have quashed the assessment for A.Y. 2006-07 & 2007-08, the question of levy of penalty for those years does not survive. Thus the penalty levied by the AO is set aside. We therefore allow the grounds in A.Y. 2006-07 & 2007-08.
11 13. Since the appeal for A.Y. 2007-08 has been quashed, the Revenue’s appeal for A.Y. 2007-08 against the order of CIT(A) also does not survive and thus the appeal of the Revenue is dismissed.
In the result, appeals of the assessee are allowed and appeal of Revenue is dismissed.
Order pronounced in the open court on 27.09.2021