PR. COMMISSIONER OF INCOME TAX (CENTRAL-2) vs. SMT. VINITA CHAURASIA

The question urged by the Revenue in these appeals is whether the ITAT erred in law in setting aside the initiation of proceedings against the Assessee under Section 153C of the Act. The further question urged is whether the ITAT erred in deleting the following additions made by the Assessing Officer („AO‟): Rs. 16,42,68,522 as cash payments from unaccounted sources; Rs. 39,65,106 on account of disallowance of payment of sinking funds; Rs. 29,73,830 on account of disallowance of maintenance security and Rs.65,70,747 on account of disallowance of commission.

The background facts are that the Assessee filed her return of income for the AY in question on 2nd August, 2010 declaring an income of Rs.2,20,19,780 under the heads income from house property, short terms capitals gains and income from other sources. The assessment for the AY in question was completed under Section 143(3) of the Act with the AO passing an assessment order dated 29th December, 2011 at a total income of Rs. 21,22,88,069 against the return income of Rs. 2,20,19,780.

On 19th June, 2009, a search and seizure operation was undertaken in

The aforementioned document dated 18th May, 2009 contained the name of the Assessee showing the area in the Vasant Square Mall as 39561.06

A questionnaire was sent to the Assessee in response to which she gave a reply on 7th December, 2011. She enclosed a confirmation from Mr. Lalit Modi clarifying that Annexure A-1 page 5 did not pertain to any transaction in respect of purchase of any space in either Big Bazar, Vasant Square Mall and that it was just a draft proposal presumably by a broker. She also pointed out that the property which she had purchased had been for a consideration which was higher than the prevalent circle rate.

However, the AO was not satisfied with the said reply. The AO who incidentally was the common AO for both Mr. Lalit Modi and the Assessee recorded the following satisfaction note for issuance of a notice to the Assessee under Section 153C of the Act: “30.6.2011 Satisfaction note for issue of notice u/S 153 C of the IT Act.

On the basis of document found and seized enquiries were conducted during the course of post search proceedings and it has come to notice that the property was acquired by the Assessee for a consideration of Rs. 32,85,37,3541 out of which only Rs. 16,42,68,832 has been paid by cheque and recorded in books of accounts by the buyer as well as seller. Apart from the above certain other payments representing Sinking Fund, Maintenance Security, Freehold charges and commission etc. have been paid by the Assessee. As such amount of Rs. 19,02,68,289 is required to be assessed in the hands of Assessee as undisclosed investment on the basis of entries mentioned on seized documents.

In view of the facts stated above, it is evident that documents belonging to the Assessee have been seized from a person covered under search u/S 132 of the I.T. Act, 1961. Hence, proceedings u/s 153C are being initiated for AY 2004-05 to 2009-10.

In the resultant assessment proceedings, the AO passed an order on 29th December, 2011 under Section 153C/143(3) of the Act making the following additions:

The Assessee‟s appeal was disposed of by the CIT (A) by an order dated

The net result was that there was an enhancement of the assessable income by of the Assessee by Rs.5,50,72,700.

Both the Revenue and the Assessee filed appeals before the ITAT which came to be disposed of by the impugned order. Interestingly it may be also mentioned that Revenue‟s appeal in the case of Mr. Lalit Modi was also heard along with these two appeals. The Revenue‟s appeals were dismissed and the Assessee‟s appeal was allowed.

The ITAT held that the initiation of proceedings against the assessment under Section 153C was bad in law. It also proceeded to discuss the merits of the additions made by the AO and the CIT (A) and found them to be unsustainable in law.

It may be mentioned at the outset that as far as the dismissal of the Revenue‟s appeal by the ITAT in the case of Mr. Lalit Modi is concerned,

This Court has heard the submissions of Mr. Dileep Shivpuri, learned Senior Standing Counsel for the Department and Mr. Ajay Vohra, learned Senior counsel appearing for the Assessee.

It requires to be first noted that the document relied upon by the Revenue (Annexure A-1 page 5) to sustain the additions made to the assessable income of the Respondent has not been shown to 'belong' to the Assessee. In arriving at this conclusion, the ITAT followed the decision of this Court in Pepsico India Holding Ltd. v. ACIT (2015) 370 ITR 295 (Del). Mr. Shivpuri on the other hand submitted that there have been subsequent decisions of the DBs of this Court which have explained the aforementioned decision and in particular the phrase „belongs to‟ occurring in Section 153C of the Act. He placed particular reliance on the decisions in Principal Commissioner of Income-tax-8 v. Super Malls (P.) Ltd. [2017] 291 CTR 142 (Del), Principal Commissioner of Income Tax, Circle-II v. Satkar Fincap (decision dated 16th November, 2016 in ITA No. 82 of 2016) and Principal Commissioner of Income Tax (Central)-2 v. Nau Nidh Overseas Pvt. Ltd. (decision dated 3rd February, 2017 in ITA No. 58/2017).

At the outset, it requires to be noticed that the search in the present case took place on 19th June 2009 i.e., prior to the amendment in Section 153 C

In this context, it requires to be noticed that a very detailed interrogation of Mr. Lalit Modi in relation to this document took place, the relevant portions of which have been extracted by the ITAT in the impugned order. Question No. 25 posed to Mr Modi and his answer thereto reads as under:

The above statement was made in the course of the search. In the assessment proceedings in the case of Suncity Project Ltd. allegedly involving Mr. Lalit Modi, a specific question was put to him and his answer thereto was recorded on oath on 15th March, 2013 under Section 131 of the

What is evident from the above reply of Mr. Lalit Modi is that even according to him the document in question did not belong to the Assessee.

There is no material whatsoever placed on record by the Revenue before the CIT (A) or the ITAT to justify the invocation of Section 153C of the Act against the Assessee on the basis that the above document belonged to her.

Turning to the decisions cited by Mr. Shivpuri it is seen that in Principal Commissioner of Income-tax-8 v. Super Malls (P.) Ltd. (supra), a pen drive was recovered from the residence of Mr. Ved Prakash Bharti who was a Director of the Assessee. The AO recorded “during the statement of Sh. Ved Prakash Bharti at the time of search, he has also stated that these documents (contained in the pen drive) pertain to him and Super Malls Pvt. Ltd., Karnal in which he is Director." It is on the basis of the above facts that this Court rejected the Assessee's contention that the said documents could not be said to belong to the Assessee.

As regards the decision in Principal Commissioner of Income Tax (Central)-2 v. Nau Nidh Overseas Pvt. Ltd. (supra), the searched person Mr. Jatinder Pal Singh, was one of the Directors of the Assessee. As noted by the Court in the course of the search, he clearly stated that some cash seized in those transactions belonged to the Assessee.

In Principal Commissioner of Income Tax, Circle-II v. Satkar Fincap (supra), again, this Court noted in para 4 of its order that “during the course

In the present case, however, it is nobody‟s case other than the Revenue that the document found in the premises of Mr. Lalit Modi belongs to the Assessee. Mr. Shivpuri referred to Section 292 C of the Act for the purposes of drawing two presumptions (i) the one contained in Section 292 C (1) (i) to the effect that the document found in possession of a person should be presumed to belong to such person. As far as this is concerned, clearly, since the document was found in possession of Mr. Modi, the presumption, if at all, is attracted only qua Mr. Lalit Modi and not the Assessee herein.

There is, therefore, nothing to contradict the categorical finding of the ITAT that the document which formed the main basis for initiation of the proceedings under Section 153C of the Act does not belong to the Assessee. One of the principal conditions for attracting Section 153C of the Act is, therefore, not fulfilled in the present case.

Turning to the document itself, Mr. Shivpuri urged that the further presumption in Section 292C(1)(ii) would stand attracted viz., that the contents of the document should be presumed to be true. His submission was

The Court is unable to accept the above submission of Mr. Shivpuri. The Court in this regard notices that the detailed interrogation of Mr. Modi revealed the source of the document and the fact that Mr. Modi was not the author of the document. Mr. Modi had suggested that it was some other broker who had given him the said document as a „proposal‟. There appears to have been no attempt made by the AO to enquire into the matter further to find out if at all there was any such other broker who had prepared the document. Further, there is no attempt also made to ascertain whether the prevalent market value of the space purchased by the Assessee could at all fetch the value indicated in the document which is Rs.32,85,37,354. This was too fundamental an issue to be left un-investigated. The AO appears to have proceeded purely on conjectures as regards what the document has stated without noticing the internal contradictions and inconsistencies. For instance, the document talks of rent payable for a period from 2006 onwards where in fact even according to the Revenue the Assessee purchased the property on 13th May, 2009. The shifting of the burden on the Assessee without making these basic enquiries to unearth the truth of the document could not have been accepted and was rightly commented upon by the ITAT. The entire basis for making the additions to the assessable income of the Assessee was a single document i.e., Annexure A-1. The attempt at making additions on the basis of Annexure A-1, without any further investigation on the above lines, is bound to be rendered unsustainable in

Therefore, even as regards the merits of the additions made by the AO, the Court funds no error having been committed by the ITAT in deleting them.

No substantial question of law arises from the impugned order of the ITAT. The appeals are dismissed.