Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH ‘E’ NEW DELHI
Before: SHRI J.S. REDDY & SHRI SUDHANSHU SRIVASTAVA
PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER and 203 have been filed by the assessee and pertain to assessment year 2009-10 and 2010-11 respectively whereas has been preferred by the Department for assessment year 2010-11. Since the appeals have common issue, they were heard together and they are being disposed of by this common order. , 203, 416/D/2014 Assessment Years: 2009-10, 2010-11 2. The facts in brief are that a search and seizure operation u/s 132 of the Income Tax Act, 1961 was carried out in the Amrapali Group on 9.9.2010. The assessee was also covered in the search. The original return had been filed on 21.9.2009 declaring income of Rs. 8,53,631 for Assessment Year 2009-10.
For Assessment Year 2010-11, the original return had also been filed on 21.9.2009 declaring an income of Rs. 4,64,619/-.
Notices u/s 153C of the Act were issued for both the years on 14.12.2012 and for both the years, the assessee had responded that the original return filed u/s 139 of the Act may be treated as return filed u/s 153C. It is seen that during the search and seizure operation in the Amrapali group of cases, documents were seized from the premises of Shri Shiv Priya, Director of M/s Ultra Home Construction Pvt. Ltd. (UHCPL) in which agreements entered by the assessee company with M/s UHCPL were seized as per the following details pertaining to Assessment Year 2009- 10:-
Documents seized from the premises of Sh. Shiv Priya, Sector-62, Noida on 09.09.2010, as per Annexure A-2, Party AB-1 , 203, 416/D/2014 Assessment Years: 2009-10, 2010-11 “Page. 74-81 This is copy of MOU dated 26.08.2009 entered between M/s Ultra Home Construction Pvt Ltd. (Builder) & M/s Moon Buildtech l*vt. Ltd., C-119 Preet Vihar Delhi-92 (Investor) - for investment in two flats at Amrapali Platinum, Tower, 1495 sqft. For Rs. 42,00,000/- which has been paid by investor as per following details. Date Tower NoJ Flat No./Size Receipt No. Cheque Amount in No. Rupees (Issued by Builder) Tower-D/1102/1775 Sq. Ft. 853 dated 14.08.2008 605955 13.08.2008 15,00,000/- CASH 14.08.2008 6,00,000/- 605960 4,45,000/- Tower-D/1103/1775 Sq. Ft. 855 dated23.08.2008 22.08.2008 CASH 16,55,000/- 14.08.2008 Total 42,00,000/- All cheques are drawn on Indian Overseas Bank, Preet Vihar, New Delhi- 110092.
The MOU dated 26.08.2009 entered between M/s UHCL and M/s Moon Buildtech Pvt Ltd. shows that M/s Moon Buildtech Pvt. Ltd. has inter alia made payment of Rs. 22,55,000/- in cash on 14.08.2009 for booking/acquisition of two flats (Tower-D 1102 & 1103) for Rs. 42,00,000/-. However the cash payment of Rs. 22,55,000/- is not accounted for in the books of account of M/s Moon Buildtech Pvt. Ltd. as the cost of two flats has been shown at Rs. 19,45,000/-. "
For Assessment Year 2010-11, the following documents were seized:-
Page No. 65 to 72, Annexure – A-2, Party-AB-1
“This is copy of MOU dated 16.08.2009 entered between M/s Ultra Home Construction Pvt. (Builder) & M/s Moon Buildtech Pvt. Ltd. (investor) – for investment in nine flats at Amrapali Platinum Tower, 1775 sq ft. for Rs. 2,25,00,000/- which has been paid by investor. The relevant extract of the agreement are reproduced as under:-
That in pursuance of the meetings held and the agreement between the Builder and the Investor, the Investor has paid a , 203, 416/D/2014 Assessment Years: 2009-10, 2010-11 sum of Rs. 2,25,00,000/- (Rupees Two Crore Twenty five lacs only) towards the Full and Final value/cost of the Nine flats and the Builder has allocated Flats with number and Tower names/numbers and sizes in favor of the investor, as per the details given: 2. Amount (in Cheque Date Tower No./Flat NoJSize Receipt No. Rs.) (Issued by No. Builder) 656 dated 606936 13.06.2008 Rs. 25,00,000/- Tower-D/703/J 775 Sq. Ft. 13.06.2008 13.06.2008 Rs. 25,00,000/- Tower-D/704/1775 Sq. Ft. - Do- 606937 13.06.2008 Rs.25,00,000/- Tower-D/801/1775 Sq. Ft. - Do- 606938 657 dated 606939 13.06.2008 Rs.25,00,000/- Tower-D/803/1775 Sq. Ft. 13.06.2008 13.06.2008 Rs.25,00,000/- Tower-D/804/1775 Sq. Ft. - Do- 606940 13.06.2008 Rs. 25,00,000/- Tower-D/901/1775 Sq. Ft. - Do- 606941 658 dated 606942 13.06.2008 Rs. 25,00,000/- Tower-D/902/1775 Sq. Ft. 13.06.2008 13.06.2008 Rs. 25,00,000/- Tower-D/904/1775 Sq. Ft. - Do- 606943 606944 13.06.2008 Rs. 25,00,000/- Tower-D/1001/1775 Sq. Ft. - Do- TOTAL 2,25,00,000/--
All the cheques are drawn on Indian Bank, Preet Vihar, New Delhi-110092
- With the condition to continue to hold or take refund after expiry of one year - for which builder has issued post dated cheque of Rs. 2,25,00,000/- dated 13.07.2010 drawn on Syndicate Bank, Raj Nagar Ghaziabad.
- Along With assured return of Rs. 5,62,500/- per month for 12 months starting from 13.09.2009 totaling to Rs. 67,50,000/- and 12 cheques have also issued.
- In case of delay/bouncing of cheque on the part of builder penalty of 4% per month.”
, 203, 416/D/2014 Assessment Years: 2009-10, 2010-11 4. For Assessment Year 2009-10, the assessment was completed at a taxable income of Rs. 39,90,631/- after making additions as under:-
(i) Rs. 22,55,000/- u/s 68 of the Act on account of undisclosed investment in cash as per seized documents.
(ii) Rs. 8,82,000/- on account of assured return as per the seized documents.
The assessment for Assessment Year 2010-11 was completed at the taxable income of Rs. 5,00,32,119/- after making the following additions-
(i) Rs. 4,50,00,000/- on account of undisclosed investment u/s 69A of the Act as per seized documents.
(ii) Rs. 45,67,500/- on account of assured return as
per the seized documents.
In the appeals before the First Appellate Authority, the assessee, besides contesting the issue on the merits of addition, also challenged the assessment on the legal ground that the 203, 416/D/2014 Assessment Years: 2009-10, 2010-11 Assessing Officer had erred in fact and law in initiating the assessment proceedings under the provisions of section 153C of the Act only on the basis of Memorandum of Understanding (MOU) seized during the course of search and seizure operation of a third party on the assumption that the same belonged to the assessee whereas the presumption u/s 132(4A) of the Act was applicable only in the case of the person in whose case the search and seizure operation was carried out under section 132 of the Act.
However, this legal ground of the assessee was dismissed by the Ld. CIT (A) with the following observations:-
“3.3 The recording of satisfaction by the AO of the person searched has two purposes. One, the proceeding u/s 153A against the person searched ceases with regard to the valuables or books / documents belonging to other persons, which can then be taken up u/s 153C against such other persons to whom the valuables or books / documents belong. Two, the commencement, conclusion and the period to which the proceeding u/s 153C relate can be determined from the date of Handing over. Thus, when the AO of the person searched and the person against whom proceeding u/s 153C is initiated are the same, it is not necessary that the reasons should be recorded in the specific file of the person searched so as to establish that the satisfaction was reached by the AO of that person only. When the AO is the same officer in both cases, recording of a simple and valid satisfaction for initiation of the proceedings u/s 153C will suffice. 6 , 203, 416/D/2014 Assessment Years: 2009-10, 2010-11
3.4 Hon’ble Supreme Court has held in Estate of Late Rangalal Jajodia v. CIT [1971] 79 ITR 505 that “An assessment proceeding does not cease to be a proceeding under the Act merely by reason of want of notice. It will be a proceeding liable to be challenged and corrected. Similarly, if there is a mistake as to name or there is a misdescription of the name, the proceeding will be liable to be challenged and corrected by giving notice to the assessee subject to such just exceptions as an assessee can take under law.” It has further held in Isha Beevi v. TRO [1975] 101 ITR 449 that “Where the power to proceed is actually there, the mere reference to a wrong section for authority to act will not vitiate the action taken. It is not enough if a wrong section or provision of law is cited in a notice or order if the power to proceed is actually there under another provision.”
In the present case a MOU dated 26.08.2009 3.5 between the appellant and M/s Ultra Home Construction Pvt. Ltd. (UHC) was found at the premises of Sh. Shiv Priya, Director of UHC. Since the appellant was signatory to the MOU, the said document belonged to the appellant. Further, the same seized document indicated that the appellant had paid cash to UHC which was prima-facie unaccounted. Therefore, a reasonable presumption of unaccounted money / income in the hands of the appellant also arose. The AO of the appellant is also the AO of UHC and Sh. Shiv Priya. In both these cases assessments have been completed u/s 153A. Therefore, recording of the satisfaction by the AO on 14.12.2012, even in the manner it has been recorded, cannot lead to the conclusion that satisfaction was not recorded by the AO of the person searched, i.e. Sh. Shiv Priya. In my respectful view, this is the correct legal position in the matter.
In the above factual and legal view of the matter, 3.6 the objection raised by the appellant to the legality of the proceedings u/s 153C is not valid and is rejected. This ground of appeal is dismissed.” 7 , 203, 416/D/2014 Assessment Years: 2009-10, 2010-11
8. However, on merits, the Ld. CIT(A) deleted the addition of Rs. 8,82,000/- on account of alleged assured return in the appeal for Assessment Year 2009-10 and for Assessment Year 2010-11 the Ld. CIT(A) deleted the addition of Rs. 4,50,00,000/- on account of alleged undisclosed investment added back u/s 69A of the Act and Rs. 34,20,000/- on account of alleged assured return.
9. Now, the assessee is in appeal for Assessment Years 2009- 10 and 2010-11 challenging first and foremost the initiation of proceedings u/s 153C of the Act. The assessee has also challenged the sustenance of addition of Rs. 22,50,000/- on merits for Assessment Year 2009-10 and of Rs.11,47,500/- on merits for Assessment Year 2010-11 whereas the Department is in appeal in Assessment Year 2010-11 challenging the action of the Ld. CIT(A) in deleting the additions of Rs. 4,50,00,000/- and Rs. 34,20,000/-.
10. At the outset it was submitted by the Ld. AR that before proceeding to decide the appeal on merits, the legal issue regarding the validity of proceedings u/s 153C of the Act should 8 203, 416/D/2014 Assessment Years: 2009-10, 2010-11 be adjudicated upon which is germane to the whole controversy in both the Assessment Years. The Ld. DR also agreed to the same and, therefore, we proceed to examine the grounds relating to the initiation of proceedings u/s 153C of the Act first and the hearing on merits will be taken up at a later stage if it is so required.
The Ld. AR submitted that the initiation of proceedings u/s 153C for both the Assessment Years were bad and illegal in law and the assessments framed were against the statutory provisions of the Act and were made without complying with the procedure prescribed in section 153C. He submitted that no satisfaction note has been recorded that the documents belong to the third party i.e. the assessee. He submitted that as per provisions of section 153C, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong to a person other than the person referred to in section 153A, then the books of account or documents or assets requisitioned shall be handed over to the Assessing Officer who shall proceed against such other person and issue such 203, 416/D/2014 Assessment Years: 2009-10, 2010-11 person notice and assess or reassess income of such other person in accordance with the provisions of section 153A. The Ld. AR submitted that in the present case in the alleged satisfaction note nowhere it has been recorded that the seized documents in the shape of MOU belong to the third party i.e. M/s Moon Buildtech Pvt. Ltd. which is the basic condition as observed from the language of the section 153C. The Ld. AR further submitted that the Hon’ble Delhi High Court has held in the case of Pepsi Foods Pvt. Ltd. vs. AC1T 270 CTR 459 that before initiating proceedings u/s 153C, the AO of the searched party has to be satisfied that the documents seized belong to person other than the searched person. It is only then that the AO of the searched person can hand over the documents to the AO having jurisdiction over the other person. In light of the decision of the Hon’ble Delhi High Court, it was submitted that before a notice u/s 153C can be issued, two steps have to be taken. The first step is that the AO 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, the document is handed over to the AO of the person to whom the said documents "belong". The I.T.A. Nos. 202, 203, 416/D/2014 Assessment Years: 2009-10, 2010-11 Ld. AR further submitted that in the present appeals, the first step itself has not been fulfilled. The Ld. AR also submitted that section 132(4A)(i) clearly stipulates that when 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 and it is for the AO to rebut that presumption and come to a conclusion or satisfaction that the document in fact belongs to someone else. The Ld. AR argued that there must be some cogent material available with the AO before he arrives at the satisfaction that the seized document does not belong to the searched person but to somebody else. The Ld. AR also relied on the judgment of the Hon’ble Delhi High Court in the case of Pepsico India Holdings (P) Ltd. Vs ACIT 270 ITR 467 for the preposition that the MOU seized did not belong to the assessee.
The Ld. AR further submitted that no satisfaction was recorded as the Assessing Officer of the searched person but as the AO of the third party i.e. the assessee. The Ld. AR relied on the judgment of the Hon’ble Delhi High Court in the case of CIT vs. Aakash Arogya Mandir Pvt. Ltd. in that satisfaction note should be recorded first as the AO of the searched party and that even if the AO of both the parties were I.T.A. Nos. 202, 203, 416/D/2014 Assessment Years: 2009-10, 2010-11 the same, satisfaction would have to be recorded separately qua the searched person and the assessee.
The Ld. DR submitted that since the Assessing Officer
of both parties was the same, no separate satisfaction was required. He vehemently argued that the spirit of the provision has to be followed and implemented and the same should not be lost in mere technicalities. The Ld. DR further submitted that the impugned MOU mentioned the name of the assessee and, therefore, the onus was on the assessee to disprove that the document did not belong to him. The Ld. DR relied heavily on the order of the Ld. CIT (A) and submitted that the same should be upheld.
We have heard the rival submissions and carefully
perused the relevant material on record. It is seen that the extract of satisfaction note recorded for initiation of proceedings u/s 153C of the Income Tax Act, 1961 on the basis of documents seized allegedly belonging to the assessee was provided to the assessee through a communication dated 17.1.2013 and is placed at pages 9 and 10 of the paper book. It has also been , 203, 416/D/2014 Assessment Years: 2009-10, 2010-11 reproduced in this order elsewhere. The point urged by the Ld.
AR with reference to the satisfaction note is that the basic ingredient of section 153C of the Act has not been satisfied and, therefore, the notices were without jurisdiction and, hence, ought to be quashed. A perusal of section 153C reveals that section 153C permits the issuance of a notice by the Assessing Officer of a person who has not been searched on the basis of satisfaction note prepared by the Assessing Officer of a searched person indicating that during the search, certain documents belonging to the other person (the person not searched) were found.
However, before a notice u/s 153C can be issued in the manner indicated, the Assessing Officer of the searched person must arrive at a positive satisfaction that the documents belong to the person not searched. In the first instance, a presumption is created by virtue of provision of return u/s 132(4A)(i) of the Act that the documents belong to the searched person. However, before the Assessing Officer of the searched person can be said to have arrived at the satisfaction that the documents belonged to the other person (the person not searched), there has to be some cogent material available with the Assessing Officer before he arrives at the satisfaction that the seized document does not , 203, 416/D/2014 Assessment Years: 2009-10, 2010-11 belong to the searched person but to the other person. The Hon'ble Delhi High Court has discussed the provision of section 153C in Pepsi Foods (P) Ltd. vs ACIT 270 CTR 459 in Para 6 as under:-
“6. On a plain reading of s. 153C, it is evident that the AO 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 AO of the searched person can handover such document to the AO having jurisdiction over such other person (other than the searched person). Furthermore, it is only after such handing over that the AO of such other person can issue a notice to that person and assess or reassess his income in accordance with the provisions of s. 153A. Therefore, before a notice under s. 153C can be issued, two steps have to be taken. The first step is that the AO 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 AO 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. Sec. 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 s. 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 the Assessing Officer to rebut that presumption and come to a conclusion of “satisfaction” that the document in fact belongs to somebody else. There must be some 14 , 203, 416/D/2014 Assessment Years: 2009-10, 2010-11 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’.
A perusal of the satisfaction note in the present appeals would show that nowhere has it been recorded that the seized documents in the form of MOU belong to the third party i.e. M/s Moon Buildtech Pvt. Ltd. or the assessee which is the basic condition envisaged in section 153C. Further, the perusal of the satisfaction note also leads us to the conclusion that it has been recorded as the Assessing Officer of the third party i.e. the assessee and there is no satisfaction note of the Assessing Officer of the searched party. The Ld. DR has vehemently contended that since the Assessing Officer of the person searched and the assessee is the same, it does not make any difference whether the satisfaction is recorded in the case of person searched or the other person. In our considered opinion, this contention advanced on behalf of the revenue is devoid of any merit. We fail to comprehend as to how the requirement of recording satisfaction by the AO of the person searched provided by the statute can be substituted with anything else. There is an underlying rationale in providing for recording of such satisfaction by the AO of the person 15 203, 416/D/2014 Assessment Years: 2009-10, 2010-11 searched. As the money, bullion, jewellery, books of account or documents etc. always come to the possession of the AO of the person searched who has to frame assessment, it is only he who can find out that which of such documents etc. do not belong to the person searched and are relevant for the assessment of the other person. It is not as if all the books of account and documents etc. found during the course of a search are evaluated by a separate authority to figure out that which of these documents belong to the person searched and to the others and thus handed over to the concerned AOs of the person searched and others for making assessment. It is only the AO of the person searched who can reach a conclusion that some of the documents etc. do not belong to the person searched but to some other person, the legislature has provided for recording of such satisfaction by the AO of the person searched. It is not permissible under the law to require the AO of the other person to record such satisfaction by the AO.
As regards the other argument of the Ld. DR that since the AO of both the persons searched and the assessee is the same person, hence the requirement of recording satisfaction by the AO 203, 416/D/2014 Assessment Years: 2009-10, 2010-11 of the persons searched should be deemed to have been fulfilled with the recording of satisfaction by the AO of the assessee. We are again unable to appreciate this contention that the commonness of the AO would make no difference in so far as the recording of satisfaction in the case of the persons searched is concerned.
What is relevant for this purpose is not the identity of the person assessing but his position and the capacity. When the law requires the AO of the person searched to record the necessary satisfaction, it is the AO having the jurisdiction over the person searched who is bound to record such satisfaction in the capacity of that AO and that too in the case of the person searched. The mere fact that the AO of the person searched and the assessee is the same person, does not, in any manner, obliterate the requirement of law necessitating the recording of satisfaction in the case of the person searched that money, bullion, jewellery, etc., found from the person searched belongs to the ‘other person.’ What is crucial to note is the capacity of the AO and not his identity. In view of the fact that when the statutory stipulation is for recording the satisfaction by the AO of the person searched, then, it cannot be substituted with the satisfaction of the AO of the ‘other person.’ This contention also fails. , 203, 416/D/2014 Assessment Years: 2009-10, 2010-11
Hence, on the facts and circumstances of the case, it is our considered opinion that the Assessing Officer of the searched person has failed to record his satisfaction that the seized documents belonged to the assessee i.e. other than the searched person. The recording of such a satisfaction is sine qua non for commencing any proceedings u/s 153C of the Act. Hence, no action could have been initiated against the assessee in absence of recording of satisfaction by the Assessing Officer of the searched person. Sans such satisfaction, the Assessing Officer has invalidly taken recourse to the initiation of proceedings u/s 153C of the Act. Hence, the action u/s 153C is not justified. The lack of jurisdiction by the Assessing Officer cannot be brushed aside under the guise of a technical defect. No assessment can be lawfully taken up and completed unless the concerned authority has the jurisdiction to do so. Lack of jurisdiction cannot be cured. Since the very first step prior to the issuance of notice u/s 153C of the Act has not been fulfilled and inasmuch as the condition precedent has not been met, the proceedings u/s 153C are liable to be quashed. It is ordered accordingly for both the years under appeal and the appeals of the assessee are 203, 416/D/2014 Assessment Years: 2009-10, 2010-11 allowed. The other grounds on merits are not being taken up as they have become in fructuous.
Since the proceedings u/s 153C itself have been quashed, the Departmental appeal for Assessment Year 2010-11 becomes in fructuous and the same is dismissed.
In the result, & 203 of the assessee are allowed and I.T.A. No. 416 of the Department is dismissed.
Order pronounced in the Open Court on 31.03.2016.