KUSH KEDIA vs. A.C.I.T. 2(1), RAIPUR (CG)

आदेश / ORDER PER RAVISH SOOD, JM: The captioned appeals filed by the assessee are directed against the respective orders passed by the CIT(Appeals)-1, Raipur, dated 26.03.2015, which in turn arises from the respective orders passed by the A.O under Sec. 143(3) r.w.s 153C of the Income-tax Act, 1961 (in short ‘the Act’) for assessment years 2004- 05 & 2005-06. As common issues are involved in the captioned appeals, therefore, the same are being taken up and disposed off by way of a consolidated order. We shall first take up the appeal for A.Y 2004-05 wherein the impugned order has been assailed before us on the following grounds: “1. In the facts and circumstances of the case, the Ld. CIT(A) erred in confirming addition of Rs.10,00,000/- made by the AO u/s.68 on account of loans received by the Appellant. 2. Ld. CIT(A) erred in confirming the addition of Rs.2,52,000/- made by the AO u/s.68 on account of gifts received by the appellant. The addition is not justified. 3. Without prejudice to above grounds of appeal, the AO erred in invoking section 153C and in passing assessment order. The notice u/s.153C issued by the AO and the consequent assessment order is illegal, without jurisdiction, not in accordance with law. 4. The appellant reserves the right to add, amend or alter any of the above grounds of appeal."

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4 Firtu Ram Dhruv, C/o. Seth Banshidhar Kedia 100000 Rice Mills. Pvt. Ltd., Balodabazar. 5 Raghunandan Lal Sahu, C/o. Seth 100000 Banshidhar Kedia Rice Mills. Pvt. Ltd., Balodabazar.

6 Ramshrey Chandrakar, C/o. Seth Banshidhar 100000 Kedia Rice Mills. Pvt. Ltd., Balodabazar.

7 Santram Yadav, C/o. Seth Banshidhar Kedia 100000 Rice Mills. Pvt. Ltd., Balodabazar.

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8 Sushil Kumar Fekar, C/o. Seth Banshidhar 100000 Kedia Rice Mills. Pvt. Ltd., Balodabazar.

9 100000 Trilochan Singh Sodhi, C/o. Seth Banshidhar Kedia Rice Mills. Pvt. Ltd., Balodabazar.

10 Ajit Patnayak, C/o. Seth Banshidhar Kedia 100000 Rice Mills. Pvt. Ltd., Balodabazar. Total 1000000

In order to verify the genuineness and veracity of the aforesaid loan transactions the Assessing Officer called upon the assessee to substantiate the same on the basis of supporting documentary evidence. In reply, it was submitted by the assessee that the aforesaid loans aggregating to Rs.10 lacs were duly considered by his father, viz. Shri. Ramesh Kedia in his income disclosed before the Hon'ble’ Settlement Commission, Kolkata Bench. However, the aforesaid explanation of the assessee did not find favour with the Assessing Officer. It was observed by him that during the course of the search operations conducted on 29.03.2006 at the premises of Shri Ramesh Kedia (supra) cheque leaves and bank passbooks of 27 bank accounts a/w. PAN cards of the aforesaid persons were found from his possession. Backed by the aforesaid facts the Assessing

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Officer was of the view that the bank accounts of the aforesaid persons were opened in order to launder the assessee’s unaccounted money in the garb of loan transactions in their names. It was further observed by the Assessing Officer that the income-tax returns of the aforementioned employees were filed with an intent to give a color of genuineness to the aforesaid transactions of laundering of the ill- gotten money of the assessee. It was observed by the Assessing Officer that during the course of search proceedings conducted at the premises of said Seth Banshidhar Kedia Rice Mills. Pvt. Ltd., Baloda bazaar, the statements of some of the employees were recorded wherein they had expressed their ignorance as regards the bank accounts, income-tax returns etc. in their name that had surfaced during the course of the search proceedings. Holding a conviction that the assessee’s unaccounted money had been routed through the bank accounts of the aforementioned employees of the assessee’s father, viz. Shri. Ramesh Kedia (supra), the A.O held the impugned loans of Rs.10 lacs as unexplained cash credit u/s.68 of the Act. It was also observed by the Assessing Officer that the assessee had claimed to have received three gifts in cash during the year under consideration, as under :

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Sr. No Particulars Amount Shri.DeenDayalDadsena 1. Rs. 50,000/- Shri Shankar Prasad Agrawal 2. Rs. 1,01,000/- Smt. ReenaAgarwal 3. Rs. 1,01,000/-

Observing that the assessee had not placed on record the copies of the bank accounts or the cash flow statements of the aforesaid donors which could substantiate the availability of cash-in-hand with them on the respective dates of giving the impugned gifts, the Assessing Officer was of the view that the assessee in the grab of bogus gifts transactions had tried to introduce his undisclosed income. Accordingly, the Assessing Officer added the aforesaid amount of Rs.2,52,000/- (supra) as an unexplained cash credit u/s 68 of the Act to the income of the assessee. Backed by his aforesaid observations the Assessing Officer vide his order passed u/s.143(3) r.w.s. 153C of the Act, dated 31.12.2007 assessed the total income of the assessee at Rs.13,74,380/-.

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aggregating to Rs.10 lacs (supra) were claimed to have been received by the assessee were persons of no financial means. It was noticed by the CIT(A) that the gross annual income of each of the employees i.e. the alleged lenders was just little above ½ of the respective loans which were stated to have been advanced by them to the assessee. Also, it was observed by him that the assessee had failed to place on record the bank statements of the aforementioned lenders a/w the source from where the respective loans were advanced by them. Backed by the aforesaid facts, the CIT(Appeals) was of the view that a perusal of the documents seized during search proceedings revealed beyond doubt that the bank statement of the aforementioned employees were opened and income-tax returns were prepared only for the purpose of routing the unaccounted money of Shri Ramesh Kedia, proprietor of Seth Banshidhar Kedia Rice Mills. Pvt. Ltd., Baloda bazaar and that of the assessee. Accordingly, the CIT(Appeal) being of the view that the assessee had failed to establish the creditworthiness and genuineness of the creditors, thus, upheld the addition of Rs.10 lacs (supra) made by the Assessing Officer. As regards the addition of Rs.2,52,000/- (supra) that was made by the Assessing Officer by dubbing the impugned gifts as bogus, the

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CIT(Appeals) found no infirmity in the view taken by the Assessing Officer and upheld the said addition. It was observed by the CIT(Appeals) that the copies of the gifts deeds of the aforementioned donors were neither notarized nor registered. It was further observed by him that though the respective donors had mentioned their PAN Nos. in the gift deeds and had claimed that they were being assessed to tax, but they had not filed the copies of their returns of income. It was also observed by the CIT(Appeals) that considering the petty income of the aforesaid donors it was beyond comprehension as to how the respective gifts could have been given by them to the assessee. In the back drop of his aforesaid observations, the CIT(Appeals) holding a conviction that the impugned gifts transactions were nothing but accommodation entries through which the assessee had introduced his undisclosed income in his capital account upheld the view taken by the A.O .

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the lower authorities, as well as considered the judicial pronouncements that have been placed into service by them to drive home their respective contentions. At the very outset of the hearing of the appeal the Ld. Authorized Representative (in short ‘AR’) for the assessee had assailed the validity of jurisdiction that was assumed by the Assessing Officer for framing the impugned assessment u/s.143(3) r.w.s. 153C of the Act, dated 31.12.2007. Elaborating on his aforesaid contention, it was submitted by the Ld. AR that as no incriminating materials “belonging” to the assessee was found in the course of search proceedings conducted at the premises of Shri Ramesh Kedia and others on 23.02.2006, therefore, the Assessing Officer had wrongly assumed jurisdiction and framed the impugned assessment u/s. 143(3) r.w.s. 153C, dated 31.12.2007. In order to buttress his aforesaid claim the Ld. AR had taken us through the orders of the lower authorities. It was submitted by the Ld. AR that in so far the addition of loan of Rs. 10 lac (supra) as an unexplained cash credit u/s.68 of the Act was concerned, the same was made by the A.O by referring to the bank accounts, cheque leaves, bank passbook, PAN cards etc. which were found during the course of search proceedings conducted on 23.02.2006 at the premises of Shri

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Ramesh Kedia (supra) and not on the basis of any incriminating material/document “belonging” to the assessee found during the course of the said proceedings. As regards the addition of the gift transactions of Rs. 2,52,000/- (supra) made u/s.68 of the Act, it was submitted by the Ld. AR that the same was made by the Assessing Officer, for the reason, that the assessee had in the course of the assessment proceedings failed to place on record requisite documents to substantiate the authenticity of the gift transactions in question. Backed by the aforesaid facts it was vehemently submitted by the Ld. AR that as the respective additions made by the Assessing Officer were not made on the basis of contents of any incriminating material/document “belonging” to the assessee that was seized during the course of search proceedings, therefore, the A.O had wrongly assumed jurisdiction and framed the assessment under Sec. 143(3) r.w.s 153C of the Act, dated 31.12.2007. Apart from that, it was submitted by the Ld. AR that as the aforesaid loans/gifts were deposited by the assessee in his bank account, therefore, the same de hors any credit of the same in his “books of account” could not have been brought to tax within the meaning of Section 68 of the Act. On merits, it was submitted by the Ld. AR that now when the CIT

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(Appeals) had held that the loan received by the assessee from the aforesaid ten persons represented the unaccounted money of Shri. Ramesh Kedia i.e. assessee’s father, therefore, the same by no means could have been held as the undisclosed income of the assessee. It was further submitted by the Ld. AR that the ‘onus’ cast upon the assessee to substantiate the genuineness and veracity of the loan transactions in question was duly discharged by him by placing on record supporting documentary evidences which had not been rebutted by the department. In order to drive home his aforesaid claim the Ld. AR had taken us through the confirmations of the lenders, copies of their respective returns of income a/w computations of income, copy of capital account, balance sheet etc. Further, in order to substantiate the genuineness and veracity of the gift transactions the Ld. AR had drawn our attention to the confirmations of gifts of the respective donors and the copies of their returns of income a/w. balance sheet and capital account of one of the donor, viz. Shri Deen Dayal Dadsena. Backed by his aforesaid contentions, it was submitted by the Ld. AR that not only the Assessing Officer had wrongly assumed jurisdiction and framed the assessment vide his order u/s.143(3) r.w.s.153C of the Act, dated

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31.12.2007, but in fact no part of the impugned addition was even otherwise sustainable considering the merits of the case.

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observed that the bank accounts of the aforesaid lenders were opened and income-tax returns were created to route the unaccounted money of Shri. Ramesh Kedia (supra) the Ld. DR could not rebut the same. At this stage we may herein observe, that while confronting the aforesaid observations of the CIT(Appeals) we had initially failed to observe that the reference as regards the routing of unaccounted money through the bank accounts of the employees was not only in context of Shri Ramesh Kedia (supra) but also in context of the assessee before us. It was stated by the Ld. DR that as the assessee had failed to substantiate the authenticity of the loans and gifts transactions in question, therefore, no infirmity did emerge from the findings of the lower authorities who had rightly made/sustained the addition of the aforementioned amount u/s.68 of the Act.

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impugned assessment u/s. 143(3) r.w.s.153C of the Act, therefore, we would first deal with the same. As observed by us hereinabove, it is the claim of the Ld. AR that as no incriminating material/document “belonging” to the assessee was found during the course of the search proceedings conducted on 23.02.2006 at the premises of Shri Ramesh Kedia and others, therefore, the Assessing Officer had travelled beyond the scope of his jurisdiction and wrongly framed the assessment u/s. 143(3) r.w.s.153C of the Act. On being confronted with the aforesaid claim of the assessee’s counsel the Ld. DR could not rebut the same. It is in the backdrop of the aforesaid factual matrix that we shall herein proceed with and deal with the validity of the jurisdiction assumed by the Assessing Officer for framing the assessment vide his order u/s.143(3) r.w.s.153C, dated 31.12.2007.

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153C(1). Notwithstanding anything contained in section 139, section 147, section 148, section149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or document seized or requisitioned belongs or belong to a person other than the person referred to in section153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person...........” “(ii). Sec. 153C (as is available on the statute w.e.f 01.06.2015) i.e post-amended : 153C(1). Notwithstanding anything contained in section 139, section 147, section 148, section149, section 151 and section 153, where the Assessing Officer is satisfied that,- (a) any money, bullion, jewellery or other valuable article or thing seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person....................... On a perusal of the pre-amended vis-a-vis post-amended provisions of Sec.153C of the Act, it stands revealed that prior to 01.06.2015 it was only where the books of account or document seized or requisitioned belongs or belong to a person other than the person referred to in section 153A that jurisdiction under Sec. 153C in respect of such other person could be assumed. However, the legislature in all its wisdom, vide the Finance Act, 2015 w.e.f 01.06.2015 had carried out an amendment, as per which, where any

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books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the same would suffice for assumption of jurisdiction by the A.O under Sec.153C of the Act.

(i). CIT Vs. Arpit Land (P) Ltd.(2017)78 393 ITR 276 (Bom) : It was observed by the Hon’ble High Court that as per the pre- amended Sec. 153C of the Act (i.e prior to 01.06.2015), the

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proceedings could only be initiated against the assessee i.e a person other than the person searched, only if the document seized during the course of the search proceedings belonged to such other person. It was observed by the Hon’ble High Court, as under: “6. We note that in terms of Section 153C of the Act at the relevant time i.e. prior to 1st June,2015 the proceedings under Section 153C of the Act could only be initiated/proceeded against a party - assessee if the document seized during the search and seizure proceedings of another person belonged to the party - assessee concerned. The impugned order records a finding of fact that the seized documents which formed the basis of initiation of proceedings against the respondent assessees do not belong to it. This finding of fact has not been shown to us to be incorrect. Further, the impugned order placed reliance upon a decision of Gujarat High Court in Vijaybhai Chandrani vs. ACIT 333 ITR Page 436 which records that the condition precedent for issuing notice under Section 153C of the Act is that the document found during search proceeding should belong to assessee to whom notice is issued under Section 153C of the Act. It was fairly pointed out to us by Mr. Mistry, the learned Senior Counsel for the respondent – assessee that the above decision was reversed by the Supreme Court in CIT vs. Vijaybhai N. Chandrani (2013) 357 ITR 713. However, we find that the Apex Court reversed the view of Gujarat High Court on the ground that efficacious alternative remedy was available to the petitioner to raise its objections before the authorities under the Act. Therefore, the Gujarat High Court should not have exercised its extra ordinary writ jurisdiction to entertain the petition. However, the Apex Court also clarified that it was not expressing any opinion on the correctness or otherwise of construction placed by the High Court on Section 153C of the Act. The Revenue has not pointed out any reason why the construction put on Section 153C of the Act by Gujarat High Court is not correct/appropriate. We find that in any case our Court has also taken a similar view in CIT vs. Sinhgad Technical Education Society (2015) 378 ITR 84 and refused to entertain Revenue's appeal. 7. The grievance of the Revenue as submitted by Mr. Kotangale is a submission made on the basis of suspicion and not on the basis of any evidence on record which would indicate that the respondent – assessee and persons searched were all part of the same group. Be that as it may, the requirement of Section 153C of the Act cannot be ignored at the altar of suspicion. The Revenue has to strictly comply with Section 153C of the Act. We are of the view that non satisfaction of the condition precedent viz. the seized document must belong to the respondent – assessee is a jurisdictional issue and non satisfaction thereof would make the entire

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proceedings taken there under null and void. The issue of Section 69C of the Act can only arise for consideration if the proceedings under Section 153C of the Act are upheld. Therefore, in the present facts, the issue of Section 69C of the Act is academic. 8. In view of the above reasons and particularly the finding of fact that seized document which forms the basis of the present proceedings, do not belong to the petitioner and the same not being shown to be perverse, the question as raised does not give rise to any substantial question of law and thus not entertained.” (ii) PCIT(Central)-2 Vs. Index Securities Pvt. Ltd. (2017) 86 taxmann.com 84 (Delhi) It was observed by the Hon’ble High Court of Delhi that the essential jurisdictional requirement for assumption of jurisdiction under Sec. 153C of the Act (as it stood prior to its amendment with effect from 1st June, 2015) qua the ‘other person’ was that the seized document forming the basis of the ‘satisfaction note’ must not merely ‘pertain’ to the other person but must belong to the ‘other person’. Observing, that as in the case before them the document though pertained to the assessee but did not belong to them, the High Court concluded that the essential jurisdictional requirement to justify the assumption of jurisdiction under Sec. 153C was not satisfied. In the aforesaid case the Hon’ble High Court held as under: “28.4 The Supreme Court also agreed with the decision of the Gujarat High Court in Kamleshbhai Dharamshibhai Patel (supra) to the extent it held that "it is an essential condition precedent that any money, bullion or jewellery or other valuable articles or thing or books of accounts or documents seized or requisitioned should belong to a person other than the person referred to in Section 153A

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of the Act." The Supreme Court observed: "This proposition of law laid down by the High Court is correct, which is stated by the Bombay High Court in the impugned judgment as well. 28.5 The above categorical pronouncement of the Supreme Court cannot, by any stretch of imagination, be termed as obiter as has been suggested by Mr. Manchanda. Even the obiter dicta of the Supreme Court is binding on this Court. 29. The search in the case before the Supreme Court was prior to 1st June 2015. Apart from the fact the Supreme Court approved the above decision of the Gujarat High Court holding that the seized documents should 'belong' to the other person, the legal position in this regard where the search has taken place prior to 1st June 2015 has been settled by the decision of this Court in Pepsico India Holdings (P) Ltd. v. ACIT (supra). In Commissioner of Income Tax v. Vinita Chaurasia (supra), this Court reiterated the above legal position after discussing the decisions in Principal Commissioner of Income Tax v. Super Malls (P) Limited (supra) and Commissioner of Income Tax (Central)-2 v. Nau Nidh Overseas Pvt. Ltd. (supra). The essential jurisdictional requirement for assumption of jurisdiction under Section 153C of the Act (as it stood priorto its amendment with effect from 1st June 2015) qua the 'other person' (in this case the assessees) is that the seized documents forming the basis of the satisfaction note must not merely 'pertain' to the other person but must belong to the 'other person'. 30. In the present case, the documents seized were the trial balance and balance sheets of the two Assessees for the period 1st April to 13th September 2010 (for ISRPL) and 1stApril to 4th September 2010 (for VSIPL). Both sets of documents were seized not from the respective Assessees but from the searched person i.e. Jagat Agro Commodities (P) Ltd. In other words, although the said documents might 'pertain' to the Assessees, they did not belong to them. Therefore, one essential jurisdictional requirement to justify the assumption of jurisdiction under section 153C of the Act was met in the case of the two Assessees.” (emphasis supplied by us) (iii). PCIT Vs. Vinita Chaurasia (2017) 394 ITR 758 (Del) :

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Adopting a similar view the Hon’ble High Court of Delhi had observed that as per the pre-amended Sec. 153C (i.e prior to 01.06.2015), it was obligatory on the part of the revenue to show that the document seized during the course of the search proceedings belonged to the assessee i.e a person other than the person searched, and it was not open for the revenue to point out that the document in question pertained to or related to the assessee. It was observed by the Hon’ble High Court, as under: 16. 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 (1) of the Act with effect from 1st June 2015. Therefore, it is not open to the Revenue to seek to point out that the document in question, “pertains to” or “relates to” the Assessee. The example given by this Court in Pepsico India Holding Ltd. (supra) is that of a photocopy of a sale deed which contains the names of the vendor and the vendee being found with the broker. The mere fact that such photocopy of the sale deed was found with the broker would not lead to the conclusion that such a document 'belongs to‟ either the vendor or the vendee. While in the present case the AO in his satisfaction note does record that the document in question does not belong to Mr. Lalit Modi i.e. the searched person, he does not indicate on what basis he proceeds as if the document belonged to the Assessee.” In this regard, it would be relevant to point out that the ‘Special Leave Petition’ (for short “SLP”) filed by the revenue against the aforesaid order of the High Court had been dismissed by the Hon’ble Supreme Court in PCIT Vs. Vinita Chaurasia [Special Leave Petition (Civil) Diary No.27566 of 2018, dated 20.08.2018]

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(iv). Pepsi Foods Pvt. Ltd. Vs ACIT [2015] 231 Taxman 58(Del): In its aforesaid judgment the Hon’ble High Court of Delhi by drawing support from Sec. 132(4A)(i) and Sec. 292C(1)(i), had observed, that the same envisaged that where any ‘document’ is found in the possession or control of any person in the course of search proceedings, the normal presumption is that the said ‘document’ belongs to such person. In the backdrop of the aforesaid settled position of law, it was observed by the High Court that if the A.O was to hold otherwise, then he was obligated to rebut the said presumption on the basis of some cogent material available with him and come to a conclusion or “satisfaction” that the said ‘document’ belonged to somebody else. It was further observed by the High Court that rebuttal of the said presumption cannot be based on surmises and conjectures. Adverting to the facts involved in the case before them, it was noticed by the High Court that there was nothing discernible from the “satisfaction note” as to how the presumption was rebutted by the A.O. It was observed by the High Court that the “satisfaction note” itself must display the reasons or basis for the conclusion that the Assessing Officer of the searched person was satisfied that the seized documents belonged to a person other than

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the searched person. The Hon’ble High Court while concluding as hereinabove had held as under: “5. We have considered the submissions made by the counsel for the parties. Before proceeding any further it would be necessary to set out the relevant provisions of the said Act as applicable to the assessment years under consideration:- “153C. (1) Notwithstanding anything contained in section 139, section 147, section148, section 149, section 151 and section 153, 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 belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A: Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person: (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year– (a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made,

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before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A.” “132 (1) XXX XXX XXX (4A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed– (i) That such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; xxxxxxxxxxxxxxxx” “292C.(1) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search under section 132 or survey under section 133A, it may, in any proceeding under this Act, be presumed– (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; xxxxxxxxxxxxxxxx” 6. On a plain reading of Section 153C, it is evident that the Assessing Officer 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 Assessing Officer of the searched person can handover such document to the Assessing Officer having jurisdiction over such other person (other than the searched person). Furthermore, it is only after such handing over that the Assessing Officer of such other person can issue a notice to that person and assess or re- assess his income in accordance with the provisions of Section 153A. Therefore, before a notice under Section 153C can be issued two steps have to be taken. The first step is that the Assessing Officer 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 Assessing Officer 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.

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Section 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 Section 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 or “satisfaction” that the document in fact belongs to somebody else. There must be some 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”. 7. This would be the appropriate stage to consider the decisions referred to by the learned counsel for the Revenue. The decision referred to in Kamleshbhai Dharamshibhai Patel (supra) is of no relevance insofar as the present case is concerned. In that case certain documents were said to have belonged to the petitioners therein but a plea had been taken that as the land, in relation to which the documents were, no longer belonged to the petitioners therefore the said documents could not be regarded as belonging to the petitioners. That is an entirely different situation and the facts of that case are clearly distinguishable from the facts of the present case. Insofar as the decision of the Allahabad High Court in Classic Enterprises (supra) is concerned, we are, with respect, unable to agree with the observations that as the proceedings are at the very initial stage the “satisfaction” is neither required to be firm or conclusive. We say so because we are of the view that this conclusion of the Allahabad High Court is premised on a consideration of the provisions of Section 158BD of the said Act which are entirely different from Section 153C. Under Section158BD the Assessing Officer’s satisfaction is with regard to “undisclosed income‟ belonging to a person other than the searched person. It is obvious that such satisfaction under Section 158BD by its very nature has to be prima facie and tentative. The same methodology cannot be imported into Section 153C where, in our view, the Assessing Officer is required to arrive at a conclusive satisfaction that the document belongs to a person other than the searched person because such Assessing Officer has to rebut the normal presumptions which are suggested by the statute under Sections 132(4A)(i) and 292C(1)(i) of the said Act. Therefore, the decision of the Allahabad High Court in the case of Classic Enterprises (supra) would not come to the aid of the Revenue. 8. Insofar as the decision in the SSP Aviation Ltd. (supra) is concerned we do not find anything therein which militates against the view that we are taking. In fact the very distinction between Section 153C and 158BD (although Section 158BD is not mentioned) is indicated by thefollowing observations of the Division Bench in SSP Aviation Ltd. (supra):-

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“It needs to be appreciated that the satisfaction that is required to be reached by the Assessing Officer having jurisdiction over the searched person is that the valuable article or books of account or documents seized during the search belong to a person other than the searched person. There is no requirement in section 153C(1) that the Assessing Officer should also be satisfied that such valuable articles or books of account or documents belonging to the other person must be shown to show to conclusively reflector disclose any undisclosed income.” 9. It is only in this context that the Division Bench was of the view that the issuance of the153C notice was only first step in the process of enquiry. 10. The only thing that remains to be examined now is the satisfaction note itself. The satisfaction note dated 02.08.2013 is in respect of the assessment years 2006-07 to 2011-12 and the same reads as under:- “M/s Pepsi Foods Pvt. Ltd. AY 2006-07 to 11-12” 02.08.2013 Satisfaction Note for issue of Notice u/s 153C of Income Tax Act,1961 in the case of M/s Pepsi Foods Pvt. Ltd, for the Assessment Years 2006-07 to 2011-12. Satisfaction Note A search and seizure operation u/s 132(1) of the I.T. Act was carried out at the various premises of M/s Jaipuria Group on27.03.2012. The group is also into various other business viz. Raymond Retail franchisee, real estate and construction, fast foods, mining, education, ayurvedic products, information technology and medical services. One of the major allegations against the Jaipuria Group is that the assessee group in order to reduce its taxable profit indulged in enhancing the cost of raw material purchased. On examination of the accounts of various concerns, it is noticed that raw material are procured from fixed vendors. Since bulk purchases are made, rates should have been lower. However raw material are being procured on a high rates resulting in lower taxable income. The bottler shall buy all units of concentrate required for the manufacture f the beverage from PFL(Pepsi Foods Ltd.), or a manufacturer approved in writing by PFL(Pepsi Foods Ltd.) at a price and in accordance with the terms and conditions established by the seller. Being the sole supplier of

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concentrate to Jaipuria Group, Pepsi Foods Pvt. Ltd. is closely associated to Jaipuria Group. During the post search investigation, summonses were issued to M/s Pepsi Foods Pvt. Ltd. to furnish certain details. The complete details were not furnished. The following documents were also found and seized during the course of search and seizure action u/s 132(1) of I.T. Act, 1961belonging to (PFL) M/s Pepsi Foods Pvt. Ltd. (PAN:AAACP1557E) over which the jurisdiction lies with the undersigned: Ann/Page No. Description of Annexure C-4/A-2/77 This page contains summary of PFL Claims as on29-11-2011 (Claims upto 31/10/2011) C-4/A-4/18-20 These pages contain a detail of DVAT impact (April’10 – June’10) Vs PFL Support report and MRP Plan. C-4/A-4/21-23 These pages contain a details of discount per C/SPDL VS PFL. C-4/A-4/27 These pages contain a details of discount per C/SPDL VS PFL. C-4/A-5/54 This page contains details of concentrate stock summary as on 31.12.2010. C-4/A-5/99 This page contains a summary of PFL Claims as on 8/9/2011. Claims upto 31/8/2011. C-4/A-5/100 This page contains a detail of PFL Support year2011 Accordingly, section 153C of the I.T. Act, 1961 is applicable to M/s Pepsi Foods Pvt. Ltd. which state that “where an 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 or belongs to a person other than the person referred to in section 153A, then the books of account, or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A.”

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In view of facts narrated above, I am satisfied that the case of M/s Pepsi Foods Pvt. Ltd. is a fit case for issue of notice u/s 153C of the I.T. Act, 1961. Notice u/s 153C dated 02.08.2013 is issued requiring the assessee to file return of income for the A.Y. 2006-07 to 2011-12. (Pukini Lokho) Asstt. Commissioner of Income Tax, Central Circle-12, New Delhi” 11. It is evident from the above satisfaction note that apart from saying that the documents belonged to the petitioner and that the Assessing Officer is satisfied that it is a fit case for issuance of a notice under Section 153C, there is nothing which would indicate as to how the presumptions which are to be normally raised as indicated above, have been rebutted by the Assessing Officer. Mere use or mention of the word “satisfaction” or the words “I am satisfied” in the order or the note would not meet the requirement of the concept of satisfaction as used in Section 153C of the said Act. The satisfaction note itself must display the reasons or basis for the conclusion that the Assessing Officer of the searched person is satisfied that the seized documents belong to a person other than the searched person. We are afraid, that going through the contents of the satisfaction note, we are unable to discern any “satisfaction” of the kind required under Section 153C of the said Act. 12. This being the position the very first step prior to the issuance of a notice underSection153C of the said Act has not been fulfilled. Inasmuch as this condition precedent has not been met, the notices under Section 153C are liable to be quashed. It is ordered accordingly. The writ petitions are allowed as above. There shall be no order as to costs.” (emphasis supplied by us ) v). Pepsico India Holdings Pvt. Ltd. Vs. ACIT &Anr. (2015) 370 ITR 295 (Del):

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In the aforesaid judgment the Hon’ble High Court of Delhi reiterated the view that was earlier taken by it in the case of Pepsi Foods Pvt. Ltd.(supra). It was observed by the High Court that unless and until it is established that the ‘document’ in question do not belong to the searched person, the provisions of Section 153C of the said Act would not get attracted because the very expression used in Section 153C of the said Act is that “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 belongs or belong to a person other than the person referred to in section 153A ....”. In view of this phrase, it was observed that before the provisions of Section 153C are invoked, the Assessing Officer of the searched person must be satisfied that the seized material (which includes documents) does not belong to the person referred to in Section 153A (i.e., the searched person). It was further observed, that the assessing officers should not confuse the expression “belongs to” with the expressions “relates to” or “refers to”. The High Court had arrived at the aforesaid conclusion by observing as under: “13. Having set out the position in law in the decision of this Court in the case of Pepsi FoodsPvt. Ltd. (supra), it must be seen as to

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whether the Assessing Officer of the searched person (theJaipuria Group) could be said to have arrived at a satisfaction that the documents mentioned above belonged to the petitioners. 14. First of all we may point out, once again, that it is nobody‟s case that the Jaipuria Group had disclaimed these documents as belonging to them. Unless and until it is established that the documents do not belong to the searched person, the provisions of Section 153C of the said Act do not get attracted because the very expression used in Section 153C of the said Act is that “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 belongs or belong to a person other than the person referred to in section 153A ....” In view of this phrase, it is necessary that before the provisions of Section 153C of the said Act can be invoked, the Assessing Officer of the searched person must be satisfied that the seized material (which includes documents) does not belong to the person referred to in Section 153A (i.e., the searched person). In the Satisfaction Note, which is the subject matter of these writ petitions, there is nothing therein to indicate that the seized documents do not belong to the Jaipuria Group. This is even apart from the fact that, as we have noted above, there is no disclaimer on the part of the Jaipuria Group insofar as these documents are concerned. 15. Secondly, we may also observe that the finding of photocopies in the possession of a searched person does not necessarily mean and imply that they “belong” to the person who holds the originals. Possession of documents and possession of photocopies of documents are two separate things. While the Jaipuria Group may be the owner of the photocopies of the documents itis quite possible that the originals may be owned by some other person. Unless it is established that the documents in question, whether they be photocopies or originals, do not belong to the searched person, the question of invoking Section 153C of the said Act does not arise. 16. Thirdly, we would also like to make it clear that the assessing officers should not confuse the expression “belongs to” with the expressions “relates to” or “refers to”. A registered sale deed, for example, “belongs to” the purchaser of the property although it obviously “relates to” or “refers to” the vendor. In this example if the purchasers premises are searched and the registered sale deed is seized, it cannot be said that it “belongs to” the vendor just because his name is mentioned in the document. In the converse case if the vendors premises are searched and a copy of the sale deed is seized, it cannot be said that the said copy “belongs to” the purchaser just because it refers to him and he (the purchaser) holds

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the original sale deed. In this light, it is obvious that none of the three sets of documents – copies of preference shares, unsigned leaves of cheque books and the copy of the supply and loan agreement – can be said to “belong to” the petitioner. 17. In view of the foregoing discussion, we do not find that the ingredients of Section 153C of the said Act have been satisfied in this case. Consequently the notices dated 02.08.2013 issued under Section 153C of the said Act are quashed. Accordingly all proceedings pursuant thereto stand quashed. 18. Writ petitions are allowed.” 10. In the backdrop of the facts involved in the case before us read in light of the aforesaid position of law as laid down by the various Hon’ble High Courts, we are of the considered view, that as in the case of the assessee before us no incriminating materials/documents “belonging” to the assessee were found during the course of search conducted on 23.02.2006 at the premises of Shri. Ramesh Kedia and others, therefore, the Assessing Officer had wrongly assumed jurisdiction and framed assessment in the hands of the assessee u/s.143(3) r.w.s 153C of the Act. Backed by our aforesaid observations we are unable to uphold the assessment framed by the Assessing Officer u/s.143(3) r.w.s.153C of the Act for want of jurisdiction on his part. We, thus, in terms of our aforesaid deliberations quash the assessment for want of jurisdiction on the part of the Assessing Officer. As we have quashed the assessment framed by the A.O under Sec. 143(3) r.w.s 153C, dated 31.12.2007,

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therefore, we refrain from adverting to and therein adjudicating the other contentions advanced by the ld. A.R i.e both on the legality of the assessment framed, as well as the merits of the additions made in the hands of the asseseee, which, thus are left open.

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on the loans aggregating to Rs. 10 lacs that were raised by him from ten lenders during the immediately preceding year i.e. A.Y. 2004-05. It was observed by the Assessing Officer that as the unsecured loans amounting to Rs.10 lacs raised by the assessee in AY 2004-05 had been held by him to be bogus, therefore, the consequential claim of interest paid on such loans during the year under consideration was liable to be disallowed.

33 Kush Kedia Vs. ACIT-2(1) ITA Nos. 105 & 106 /RPR/2015

Sd/- Sd/- JAMLAPPA D BATTULL RAVISH SOOD ACCOUNTANT MEMBER JUDICIAL MEMBER रायपुर/ RAIPUR ; �दनांक / Dated : 31st March, 2022 ***SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant. 2. ��यथ� / The Respondent. 3. The CIT(Appeals)-1, Raipur (C.G) 4. The CIT-1, Raipur (C.G) 5.�वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण,रायपुरब�च, रायपुर / DR, ITAT, Raipur Bench, Raipur. 6.गाड� फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // �नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, रायपुर / ITAT, Raipur.

34 Kush Kedia Vs. ACIT-2(1) ITA Nos. 105 & 106 /RPR/2015

Date 1 Draft dictated on 02.02.2022 Sr.PS/PS 2 Draft placed before author 21.02.2022 Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr.PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order