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Income Tax Appellate Tribunal, DELHI
Before: SH. G.S.PANNU, HON’BLE & SH. ANUBHAV SHARMA
The Revenue has come in appeal against the appellate order dated 03.09.2017 for the Assessment year 2014-15 passed by Commissioner of Income Tax (Appeals)-04, Kanpur (hereinafter referred to as the First Appellate Authority in short Ld. F.A.A.) in assessment order dated 26.05.2017 u/s 153C / 143C of the income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by Assessing Officer, DCIT, Central Circle, Noida (hereinafter referred to as ‘the AO). The assessee has filed cross objections to the same.
The facts in brief are a search and seizure operation u/s 132 of the Act was conducted in the Maconns, Meenu and Yadav Singh group of cases wherein certain incriminating documents were found & seized relating to the assessee. Further, in response to notice u/s 153C of the Act assessee filed its return declaring income of Rs. (-) 27,367/-, Rs. (-) 20,047/-, Rs. (-) 35,602/-, Rs. 4,62,130/- and Rs. 1,06,99,690/- for A.Y. 2010-11 to A.Y. 2014-15 respectively. Later on, notices u/s 143(2) & 142(1) were also issued and A.O. completed the assessment by making additions of Rs. 1,02,316/- for A.Y. 2010-11, Rs. 10,94,726/- for A.Y. 2011-12, Rs. 4,02,050/- for A.Y. 2012-13 and Rs. 34,17,000/- & Rs. 3,34,50,000/- for A.Y. 2014-15 on account of unexplained investment, unexplained cash credit, and income from other sources. Aggrieved, appellant is in appeal before me.
M/s. N.M Buildwell Pvt. Ltd. is a Private incorporated on 13th Dec. 2007. It is classified as Non-govt Company and is registered at Registrar of Companies, Kanpur. The Company was incorporated with object to deal in building construction and civil engineering. Its registered address is A-57 Sector-8 Noida. Its directors are Akhay Yadav & Richa Ahluwalia.
The assesscc e-filcd its return of income on 29/02/2010 declaring total income of Rs. 1,06,99,690/- u/s 139 of the IT Act, 1961. Subsequently, for the purpose of assessment, notice u/s I53C of the Act was issued on 27/06/2016 to e file ITR within 15 days of the receipt of the notice. In response to the same, dated 29/10/2016, the assessee filed a letter treating the return filed on 04/08/2009 as return filed in pursuance to notice u/s 153C of the Act. Subsequently, notice u/s 143(2) of the Act was issued dated 19/11/2016. On change of incumbent, notice u/s 142(1) was issued on 25/07/2016 & the date or compliance was fixed on 29/07/2016. Again questionnaire along with notice u/s 142(1) of the Act was issued dated: 07/10/2016 and the date was fixed on 13/10/2016 to make compliance and furnish the details as called for.”
The A.O made additions of income from other sources and cash credit, unexplained investment and unexplained cash credits, however, the ld. First Appellate Authority allowed the appeal of the assessee observing the AO has not discussed any incriminating material found & seized as a result of search u/s 132 which is the jurisdictional precondition for issued of notice u/s 153C of the Act.
Ld. CIT(A) relied the judgment of Hon’ble Supreme Court of India in CIT-3 Pune vs. Sinhgad Technical Education society (2017) 397 IRE 344 (SC) and the judgment of Hon’ble Delhi High Court in Index Security Pvt. Ltd. [86 taxman.com 84 (Del) and observed as below :
“5.5 Thus, from the plain reading of language of section 153C of the Act and various judicial pronouncement cited here-in-above, it is abundantly clear that in order to reopen the assessment of other person u/s. 153C of the Act for the assessment year earlier to the year of search, direct correlation must exist between existence of incriminating material and relevant assessment year. In the instance case, admittedly, addition are not based on any incriminating document found as a result of search. In view of the detailed discussion and the judicial authority mentioned here in above, it is concluded that notice u/s 153C of the Act issued by the AO need to be treated as void ab-initio, invalid and legally not sustainable. Therefore, assessment framed on the basis of legally unsustainable notice is hereby quashed and annulled. Thus, these legal grounds of appeals are decided in favour of the appellant. 5.6 Though, addition made by AO was not justified in terms of provisions u/s 153C of the Act. However, it is open for AO to take remedial action in accordance with the provisions of income tax Act, to assess/ reassess the income escaping assessment, if any.”
Now, the Revenue has come in appeal raising following grounds :- “
1. Whether on facts and circumstances of the case and in law, the Ld. CIT (A) erred in applying the decision of the Hon’ble Supreme Court in the case of M/s Sinhgad Technical Education Society, which was distinguishable on the facts of the present case as the same pertained to prior period to 01.04.2005 whereby 153C notice can be issued when AO is satisfied that seized material has a bearing on the assessment of income of other person.
2. Whether on facts and circumstances of the case and in law, the Ld. CIT(A) erred in law while holding that there was no incriminating material for the issuance of notice u/s 153C, without appreciating that in the satisfaction note the AO had brought out the facts and circumstances, which indicated that the Assessee company has entered into transactions which remained unexplained hence such documents constituted “incriminating material” for the purpose of the issue of notice u/s 153C in the context of assessee.
3. Whether on facts and circumstances of the case and in law, the Ld. CIT (A) erred in not appreciating that seized documents annexurised as EW-2, Page No.36,97-98 and EW-9, 27-29 were found from the premise of Rajinder Kumar Manocha detailing the transfer of property through transfer of shares.
4. Whether on facts and circumstances of the case and in law, the Ld C1T(A) erred in not appreciating that after 01.04.2005 the test of issue of notice u/s 153C is availability of seized material which has bearing on assessment of income which has to be only in nature of prima facie belief having live nexus & not in nature of absolute evidence based on detailed investigation.
5. That the Appellant craves leave to add or amend any other ground of Appeal
as stated above as and when needs for doing so may arise.
6. The order of the Ld. CIT (A) is erroneous in law and on facts of the case and is liable to be set aside and the order of the AO be restored.
8. The Cross Objections were also filed by the assessee raising following grounds :-
That on the facts and circumstances of the case and 1) provision of law Initiation of proceeding u/s 153C is illegal and bad in law and thus the assessment requires to be quashed That on the facts and circumstances of the case and 2) provision of law the single notice issued u/s 153C for the AY 2009-10 to 2014-15 is illegal and bad in law and thus assessment order passed by the Ld AO requires to be quashed. (i) That on the facts and circumstances of the case and 3) provision of law the satisfaction note recorded by the Ld AO is illegal and bad in law and thus assessment order passed by the Ld AO requires to be quashed.
(ii) That no satisfaction note if any recorded by the Ld AO as the AO of the searched party was provided to us which is very much required after the amendment made by the finance act 2014 with effect from 01.10.2014 and thus assessment order passed by the Ld AO requires to be quashed 9. Heard and perused the record.
On behalf of the Revenue, Ld. DR submitted that Ld. First Appellate Authority has fallen in error in applying the ratio of the judgment Sinhgad Technical Education society (2017) 397 IRE 344 (supra) it was submitted that as the case was centralize no separate satisfaction of the AO. It was submitted that the satisfaction note recorded was descriptive indicated all the incriminating material.
10.1 On the other hand, Ld. Counsel for the assessee submitted that the satisfaction note does not discussed of any incriminating material and no incriminating material allegedly collected in the search and seizure proceedings was relied by the ld. AO while making assessment u/s 153C. It was submitted that the satisfaction note merely mentions that a verification is required but does not indicate what was specific evidences collected which was required to be explained by the assessee in assessment under section 153C. However, arguing on merits supporting the findings of Ld. CIT(A) ld. counsel for assessee stated at Bar that he is not pressing the cross objections.
The grounds raised arise from common set of facts and are taken up together for convinience. Now, appreciating the matter on record it can be observed that at page no. 36 to 38 the satisfaction note recorded by the Ld. AO for the purpose of Section 153C of the Act shows that AO referred to document EW-2 page no. 36, 97-98 and EW-9, 27-29 and based upon them found that there was a trail of transfer of shares and was of opinion of transfer of shares does not reveal the real value of shares which was required to be assessed as business income of the share transfers and not a simple case of capital gain. However, in the impugned order there is no reference of the documents allegedly found of incriminating nature, found and seized during the operation u/s 132 of the Act.
In this context, it can be observed that the Ld. AO in para 6 of its order has given finding on the analysis of audited financial results as well as income tax return filed by the assessee u/s 139 of the Act, and not to any matterial fund in search, while considering to disallow certain expenses u/s 24A from income from house property while expenses claimed in the P & L account such as finance cost Rs. 6,21,520/- depreciation Rs. 7,99,855/- and other expenses of Rs. 16,92,807/- were found to be more than the declared income in P & L Rs. 4,72,500/-. Therefore, considering that the assessee company was not showing any independent business rather it is only providing services / facilities to the tenants. The business income was treated as Nil. The same has no association with the alleged incriminating matter.
Further Ld. AO observed that the assessee had received share application money 3,34,50,000/- from Akshay Yadav against which 17,000/- shares were issued to Akshay Yadav at the premium of Rs. 990/- per share. The Ld. AO was of the view that the source of funds infused by Mr. Akshay yadav was not satisfactory and also the valuation of shares was not justified, therefore, treating the same as unexplained cash credit u/s 68 of the Act, the admission was made. The same also has no finding based on the alleged two documents found in search. Specially if they related to relevant AY also.
Thus, factually the observations of Ld. CIT(A) in the impugned order is correct that in the relevant assessment order u/s 153C of the Act, no incriminating document has been relied. Thus, the reliance placed by the Ld. CIT(A) on the judgment of Hon’ble Supreme Court in CIT(A)-3, Pune vs. Sinhgad Technical Education Society (2017) 397 ITR 344 (SC) to the conclusion arrived by Ld. CIT(A) requires no interference. There is no distinction of facts to have not followed the ratio. There is no substance in the grounds raised and same are decided against the Revenue. The appeal of revenue is dismissed.
Order pronounced in the open court on 30th June, 2023.