ACIT, CENTRAL CIRCLE-2, FARIDABAD vs. COGENT REALTORS PVT.LTD., GURGAON

Briefly stated, a search and seizure operation under Section 132 of the Act was carried out on 21.07.2016 at the residential/business premises of the persons associated with M3M Group. A satisfaction was drawn by the Assessing Officer on the search person under the provisions of sub section (1) of section 153C that certain documents seized relates to the third party, i.e., assessee and will have bearing on the determination of total income for AYs 2011-12 to 2017-18 of the assessee herein. In consonance of satisfaction, the provisions of Section 153C were invoked by Assessing Officer of the assessee and the assessment was framed under Section 153C of the Act r.w. Section 153A of the Act. The Assessing Officer while framing the assessment under Section 153C of the Act inter alia made disallowance of Rs.5,15,65,800/- for the Assessment Year 2014-15 in question on the ground that expenditure towards EDC charges amounting to Rs.17,18,86,100/- paid to HUDA has not been subjected to TDS provisions. Consequently, the Assessing Officer invoked the provision of Section 40(a)(ia) of the Act and 30% of EDC charges paid to HUDA amounting to Rs.5,15,65,800/- was disallowed.

Aggrieved, the assessee preferred appeal before the CIT(A). The CIT(A) in a combined order for various assessees including the documents referred to in the satisfaction note is not in the nature of incriminating material and accordingly the provisions of Section 153C is not applicable at the first instance. The relevant operative paragraph of the order of the CIT(A) reads as under: “Parag 7.1.8 (vi) Cogent Realtors Pvt. AY 2014-15 The document referred to in the satisfaction note of the appellant refers to Annexure A-2 seized from the premises of M3M Group. This document in the trial balance of the appellant company from 01.04.2011 to 31.3.2012. This referred document does not relate to the year consideration, nor it can be termed as incriminating material on the basis of which addition has been made as per provisions of Section 40(a)(ia) of the Act. Keeping in view the facts and circumstances of the case(s) as discussed above and respectfully following the decision of Hon'ble Courts as discussed in this appellate order including decision of Hon'ble Supreme Court in the case of CIT v/s Singhad Technical Education Society, wherein it was held that with regard to the incriminating document seized should belong/ relate in the case to a person other than person referred to in section 1534 of the Act, the assumption of jurisdiction u/s 153C of the Act in absence of any incriminating material related to the year under consideration was not in accordance with law and hence held to be erroneous. 7.1.9 The AO has relied on the judgment of Hon'ble Supreme Court in the case of CIT vs Mukundray R. Shah facts of the appellant's case are different on facts and hence cannot be relied upon in these cases as discussed hereunder:- The addition made by the A0 u/s 40a(ia) of the Act by disallowing the amount which was never claimed by the appellant company as an expense and thereafter adding back 30% of the EDC paid, did not emanate from the document referred to in the satisfaction note, as a result of search. 7.1.10 In view of the facts of the case under consideration and the judicial pronouncements discussed it is clear that:- (a) In the cases under consideration, the addition(s) made are not emanating out of any incriminating material found during the search proceedings nor any proceedings, were pending or abated on the date of search. (b) Hence the addition(s) made u/s 40(a)(ia) of the Act cannot be sustained and hence deleted looking into the position of law and facts of the case.

8. Since, the issue has been decided on the legal ground regarding jurisdiction of the A0 to make such addition in assessment made under Section 1534 r.w.s. 153C of the Act, when no incriminating documents/material or undisclosed income belong to the appellant companies was found during search operations for the year under consideration, as apparent from the satisfaction note(s) cannot be sustained. Therefore the other ground of appeal relating to the merit of these cases are not been considered.”

The ld. DR for the Revenue reiterated the observations made by the Assessing Officer and relied upon the assessment order.

The ld. counsel for the assessee stated that the only material found in the course of search was some Trial Balance and the additions made are wholly unrelated to the material found in the course of search. Consequently, the provisions of Section 153C has no application as rightly held by the CIT(A). The ld. counsel also pointed out that the subject matter of disallowance has been adjudged in favour of assessee in Assessment Year 2012-13 in order dated 21.09.2022.

In the light of the assertions made on behalf of the assessee, we take note of the observations made by the Co-ordinate Bench in Assessment Year 2012-13 which read as under: “6. Having carefully gone through the decision of Hon'ble Delhi High Court in case of BPTP Ltd. vs. PCIT (supra), we find that while dealing with an identical issue of non-deduction of TDS and EDC paid to HUDA, the Hon'ble High Court has observed that Revenue was unable to point out any specific provision which deals with EDC. In other words, the Hon'ble Court held that payment of EDC was not covered under any of the TDS provisions. In case of M/s. Splender Land Bus Ltd. vs. Additional CIT (supra), the co-ordinate Bench, after following the decision of another co-ordinate Bench in case of Spaze Tower Pvt. Ltd. vs. ACIT - ITA No. 5842/Del/2019 dated 26.05.2022, has held that by not deducting tax on payment made to HUDA towards EDC, no violation of TDS provision was made. Thus, with due obedience to the ratio laid down in the judicial precedents cited before us, we hold that there was no legal requirement on assessee to deduct tax at source while making payment of EDC to HUDA. Therefore, the disallowance made under Section 40(a)(ia) of the Act is unsustainable on merits. Accordingly, we do not find any reason to interfere with the decision of learned Commissioner (Appeals) though, based on or own reasoning.”

Having regard to the view expressed in AY 2012-13 by the Co- ordinate Bench, there is hardly any merit in the disallowance carried out by the Assessing Officer as held by CIT(A). Besides, we find merit in the findings rendered by the CIT(A) for lack of jurisdiction under Section 153C owing to absence of any incriminating material. We thus no perceptible reason to interfere with the order of the CIT(A). In the result, the appeal of the Revenue is dismissed.

Order pronounced in the open Court on 12/05/2023