Income Tax Appellate Tribunal - Delhi
M/S. Sir Shadilal Enterprises Ltd., New ... vs Dcit, New Delhi on 16 December, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'G', NEW DELHI
Before Sh. Amit Shukla, Judicial Member
Dr. B. R. R. Kumar, Accountant Member
ITA No. 5727/Del/2014 : Asstt. Year : 2004-05
ITA No. 5728/Del/2014 : Asstt. Year : 2005-06
M/s Sir Shadilal Enterprises Vs Deputy Commissioner of Income
Ltd., 4A, Hansalaya, 15, Tax, Circle-8(1),
Barakhamba Road, New Delhi
New Delhi
(APPELLANT) (RESPONDENT)
PAN No. AAECS3636D
Assessee by : Sh. G. N. Gupta, Adv.
Revenue by : Sh. S. S. Rana, CIT DR
Date of Hearing: 17.09.2019 Date of Pronouncement: 16.12.2019
ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
The prese nt appeals have been filed by the assessee against the orders of the ld. CIT(A)-XI, New Delhi dated 21.08.2014.
2. Since, the issues involved in both the appeals are common, they were heard together and are being disposed off by common order.
3. In ITA No.5727/Del/2014, following grounds have been raised by the assessee:
"1.1 That on the facts and in the circumstance s of the case, the learned Commissioner of Income Tax (Appeals)-XI, New Delhi (hereinafter called CIT(A) for short) has erre d in law in confirming the action of the Assessing Officer Circle -8(1), New Delhi (he reinafter 2 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
called the AO for short) in reviving the assessment proceedings u/s 143(3) o f the Income Tax Act, 1961 (Act for short) for A.Y. 2004-05 with reference to the provisions of se cond proviso of sub section (1) of section 153C of the Act. The impugned assessment proceedings became barred by limitatio n as on 31.12.2006 and the assessment o rder dated 29.11.2013, therefore, requires to be quashed.
1.2 That on the facts and in the circumstance s of the case, the learned CIT(A) has erred in law in holding that the extant law on 16.05.2013 (the date on which the AO started the reassessment proceedings) is applicable and in rejecting the appellant's submission that the law prevailing on 31.12.2006 was applicable as far as limitation period for assessment year 2004-05 is concerned.
2.1 That on the facts and in the circumstance s of the case, the learne d CIT(A) erred in upholding an addition of Rs. 3,33,13,300/- made by the AO under section 69C of the Act o n acco unt of alle ged unaccounted contributions made by the appellant to Uttar Prade sh Distillers Association (UPDA) in Financial Year 2003-04 solely on the basis of the statement of Shri R.K. Miglani recorded on 14.02.2006 at the back of the appellant and without allowing an opportunity to the appellant to cross examine Shri R.K. Miglani although a specific re quest in this regard was made by the appellant and without appreciating that Miglani had filed an Affidavit dated 03.03.2008 unequivocally denying the statement given by him on 14.02.2006 during the course of search procee dings.
2.2 That on the facts and in the circumstance s of the case, the learned CIT(A) erred in upholding the addition of Rs. 3,33,13,300/- made by the AO u/s 69C of the Act without appreciating that in the hands of UPDA, the alleged contribution has been taxed u/s68 of the Act.
2.3 That on the facts and in the circumstances of the case, the learned CIT(A) erred in confirmity the 3 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
addition of Rs.3,33,13,300/- made by the AO o n the basis of surmises & conjecture.
3. Witho ut prejudice to the generality of the ground of appeal no. 2.1 above, CIT(A) erred in upholding the addition of Rs. 3,33,13,300/- made by the AO on account of alleged unaccounted contribution paid by the appellant to UPDA without allowing a corresponding deductio n u/s 37 of the Act in respect of these alleged contribution to UPDA."
4. For the assessment year 2005 -06, the ground no. 2.1 mentions the amount of Rs.185,08,800/-. The remaining grounds remained same. Similarly, the order of the ld. CIT (A) for both the years is also similar except change of amount pertaining to each year.
5. For these two years in question, the order was passed by the Co-ordinate Bench of IT AT on 30.05.2018 which has been recalled vide order dated 15.07.2019 fixing the appeals for hearing afresh. Hence, the present proceedings.
6. Brief facts of the issue involved in the case relates to unexplained expenditure of Rs. 3,33,13 ,300/- and Rs. 1,85,08,800/- brought to tax by the revenue u/s 69C of the Income Tax Act, 1961.
7. The ground no. 1.1 & 1.2 refer to prayer of the assessee that the impugned assessment proceedings be came barred by limitation as on 31.12.2006 in the asse ssment order dated 29.11.2013, the refore, requires to be quashed. Before us, during the arguments the ld. AR submitted that the case has been time barred as pe r the provisions of Section 153A(2) of the Income Tax Act, 1961 standing as on 31.12.2006. He 4 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
argued that the provisions of Section 153A(2) of the Act were introduced by Finance Act, 2008. Hence, the assessment o f the assessee is barred by limitation. Further, the ld. AR relied on the arguments taken before the ld. CIT(A) which are as unde r:
"Ground of Appeal No. 1 is directed against the legality of the impugne d assessment order on the ground that it is barred by limitation and, therefore, requires to be quashed. The appellant had sought my advice in this matter and a copy of my written opinion dated 07.06.2013 was filed before the learned De puty Commissione r of Income Tax Circle 8(1). New Delhi (hereinafte r called AO for short) and has also been filed in the statement of facts anne xed to Form No.
35. It is submitted that the reassessment proceedings for Assessment Year 2004-05 stood time barred by limitation on 31.12.2006 because as on 31.12.2006 the provisions of Section 153A(2) of the Income Tax Act, 1961 (Act for short) were not in the statute of books. The provisions of Section 153A(2) of the Act we re introduce d only by Finance Act, 2008 w.e.f. 01.06.2003. It is submitted that it is trite law that the legislature does not intend to attribute to the amended provisions a gre ater retrospectivity than expressly mentioned no r does it authorize the Assessing Officer to commence proceedings which before the new law came into force had become time barre d. If any authori ty is needed for this elementary proposition of law, reference can be made to the decision of Hon'ble Supreme Co urt of India in the case of S.S. Gadgil V. Lal & Co.53 ITR 231. To the same effect are the decisions of Hon'ble Allahabad High Co urt in Controller of Estate Duty V. Zafrul Hasan 146 ITR 220, CIT V Hari Raj Swarup & Sons 138 ITR 462, the decision of Hon'ble Kerala High Court in the case of Varkey Jacob and Co. V. CIT 275 ITR 146 & the decision of Supreme Court in K.M. Sharma V. ITO 254 ITR 772. The learned AO has rejected this conte ntion vide his letter no . F. No. DCIT Circle 8(1)/2013-14/926 dated 21.08.2013 by tersely observing "Regarding the opinion o f G.N. Gupta Advocate it is stated that the above notice has been issued keeping in view the existing provisions 5 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
the Income Tax Act, 1961''. With the greatest respects to the learned AO, the aforemention observation is tautological and the least that can be said about it is that these observations do I amount to a speaking order. In the se circumstances, it is submitted that the impugned assess order is barred by limitation and may, therefore, kindly be quashed."
8. The ld. DR submitted that the amendments introduced by Finance Act, 2008 in Section 153A(2) were with effect from 01.06.2003. Hence, argued that the case canno t be held to be time barred. He relied on the o rde r of the ld. CIT (A).
9. Heard the arguments of bo th the parties and perused the material available on reco rd. We have gone through the o rde r of the ld. CIT(A) and afte r going through the rationale and the interpretation of the provisions of the Act, we find that the order of the ld. CIT (A) is legally valid with regard to the limitation to pass the assessment order. For the sake of ready reference, the relevant portion of the ld. CIT (A) reproduced belo w:
"7.1. The facts of the case and the written submissions of the appellant have been carefully considered. Ground No. 1 of the appeal is against the AO's action in resumption of assessment pro ceedings for the year under co nsideration with re ference to the provisio ns of se cond proviso to section 153A of the Act. It has been claimed that the impugned assessment order is barred by limitation. The appellant has submitted that the reassessment procee dings fo r AY 2004-05 stood time barred by limitation on 31.12.2006 because as on 31.12.2006, the provisions of section 153A(2) of the Income Tax Act, 1961 were not in the statute of books. The provisions of section 153A(2) of the Act were introduced only by Finance Act, 2008 with retrospective effect from 01.06.2003. The appellant has argued that the legislature does not intend to attribute to the amended provisions a 6 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
greater retrospectively than expressly mentioned nor does it authorize the AO to commence proceedings which before the amendment had already become time barre d. The appe llant has relied upon the decisions of Hon'ble Apex Court in the case of S.S. Gadgil Vs. Lai & Co. (supra) and K.M. Sharma vs. ITO (supra).
7.2. I have conside red the facts of the case as well as the submissions made by the appellant on the issue. It is observed that the assessment proceedings for the year under consideration u/s 143(3) were already in progress whe n a search and seizure operation took place in the relate d case consequent to which procee dings u/s 153C of the Act were initiated in the appellant's case . As pe r the second proviso to section 153A of the Act, the pending assessment procee dings were abated. For the better appreciation of the facts the second proviso to section 153 A of the Act is reproduce d as under:
''Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under sectio n 132 or making or requisition under section 132A, as the case may be, shall abate."
As per the Black's Law Dictionary, the word 1 abate'' being verb, its noun 'abatement' has been defined as under:
"abate ment:- 1. The Act of eliminating o r nullifying
2. The suspension or defeat of a pending action for a reason unrelated to the merits of the claim.
3. The Act of lessening or mo derating;
diminution in amount or degree"
The word 'Abate' which is verb corresponding to the noun 4abatement' derives more close r definition from the '2.' above viz. "The suspension or de feat of a pending action for a reason unre lated to the merits of the claim". It has also been clarified that although the 7 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
term 'abatement' is some times used loosely as a substitute for 'stay of proceedings' , the two may be distinguished on several grounds. For example, when grounds for abatement of an actio n exist, the abatement of the action is a matter of right, but a stay is granted in the court's discretion. And in prope r circumstances a court may stay a procee ding pending the outcome of anothe r proceeding although a strict plea in abatement could not be sustained. The concepts of 'survival' and 'revival' are intrinsically attached to 'abatement'.
There is no confusion regarding the abatement of original assessment proceedings consequent to the procee dings u/s 153C of the Act initiated in the appellant's case. It is observed that when the assessment u/s 153C of the Act in the appellant's case was annulled by the Hon'ble ITAT on 23.11.2012, the AO resumed the original assessment proceedings on 16.05.2013. Prima-facie the AO has acted on the existing provisio ns as on 16.05 .2013 and as per the existing provisions, sectio n 153A(2) was in statute on that day by which the abated proceedings stood revived w.e .f. the date of receipt of the o rder of such annulment. On the other hand, the appellant's plea is that this provision was inserted by the Finance Act, 2008 with retrospective effect fro m 01.06.2003 and since the procee dings for AY 2004-05 had already got time barred on 31.12.2006, the AO was not empowered to revive such proceedings. To my view, the appellant's argument is misplaced. It is true that in appellant's case normal assessment for AY 2004-05 should have been completed by 31.12.2006 but here is a case where the AO had to abate the original assessment proceedings due to search operation in the appellant's related case s. Thus, the original assessment proceedings which were pe nding remained suspended unrelated to the merits of the case. As the arrangement of provisio ns in the Act provides such suspension of proceedings as justified since the AO is empowered to make all possible additions in assessment u/s 153C of the Act what he could have done in normal assessment proceedings. In addition to it, the AO is empowered to make additions base d on 8 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
seized/re quisitioned asse ts or books of accounts, documents etc. which would not be done in normal assessment proceedings. It is in that sense the procee dings u/s 143(3) of the Act were merged and replace d by proceedings u/s 153C of the Act. Since the matter re mained live in the shape of assessment procee dings u/s 153C of the Act till the ne w amendment through Finance Act, 2008 was introduced w.e.f. 01.06.2003 retrospectively, it cannot be concluded that the revenue was barred by any re medy on annulment of such pending assessment. It is the law applicable on 16.05.2013, which was duly applied by the AO and not the law existing on 31.12.2006, which is being relied upo n by the Ld. AR of the appellant. The reliance put by the Ld. AR o n the decisions o f Hon'ble Supreme Court in the case of S.S. Gadgil Vs. Lal & Co. (supra) and K.M. Sharma vs. ITO (supra) are not applicable in the appellant's case as facts in both the cases are distinguishable. In bo th the cases, the assessee's case was barred by the existing provisio ns but the amended provisions were applied by the AO for initiating the reassessment proceedings. In the appellant's case, the assessment proceedings simply remained suspended because of the application of other provision of the Act and therefore it could not be upheld that such suspended proceedings got time barre d on 31.12.2006. Se condly, on the date of annulment o f proceedings u/s 153C of the Act, the statute had provided the revival of such suspended procee dings. In view of the above, the appellant's argument that the assessment proceedings were barre d by limitation 1 has no merits. The AO is justified in proceeding ahead in the case. Ground No. 1 of the appeal is dismissed."
10. Gro und No. 2.1 & 2.2 relate to addition of Rs.3,33,13,300/- u/s 69C of the Income Tax Act, 1961.
11. Brief facts of the issue are that the assessee company M/s Sir Shadi Lai Ente rprise s Ltd., engaged in the business of manufacturing and sales of Sugar and Alcoholic Liquor. The company having three units as unde r:
9 ITA Nos. 5727 & 5728/Del/2014Sir Shadilal Enterprises Ltd.
1) Upper Doab Sugar Mills at Shamli Distt. Muzaffar Nagar,
2) Shamli Distillery and Chemical Works at Shamli, Distt. Muzaffar Nagar; &
3) Pilkhani Distillery and Chemical Works at Pilkhani Distt. Saharanpur.
12. Assessee company is a member of M/s UPDA (Uttar Pradesh Distillery Association) which is a Registered Society, formed by all the distilleries of Uttar Pradesh for their welfare to jointly take up their cause with various authorities on different issue s. Mr. R.K. Miglani was its General Secretary during the year under consideration. Main function of the association M/s UPDA was collection of huge sums from its members which represented their unaccounted income and then utilizing these sums for the payment to various civil authorities including politicians through UPDA for their ulterior motive to gain the be nefits.
13. Search and Seizure Operation under section 132 of the I.T. Act, 1961 was carried out at the residential premises of Mr. R.K. Miglani, General Secretary of UPDA on 14.02.2006 as well as at the premises of M/s Radico Khaitan (a leading distiller of Uttar Pradesh based company) Many incriminating documents were seized during search operation from both the places. Statements of various persons including Shri Miglani were recorded u/s 134(4)/133A of the I.T. Act, 1961. The documents so seize d from Mr. Miglani's residence, General Secretary of M/s UPDA were regular accounts of money received date wise from the member distilleries during the financial year 2003-04 to 2005-06 (till 14.02.2006) represent the contribution by each- member distillery on the basis of their production of country 10 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
liquo r. As per the statement of Mr. Miglani, the mone y so collected by the UPDA from its member distillery on regular basis was given / distributed to various officials and politicians which basically represented illegal payments. This whole process/activity was coordinated through select committee kno wn as "Core Committee" and Shri Miglani as General Secretary maintained regular accounts of this collection and payments.
14. Documents seized during the course of search coupled with the contents of the stateme nts of Shri R.K. Miglani, General Secretary of UPDA, showed that unaccounted payments were made by various distilleries including the assessee M/s Sir Shadi Lai Enterprises Ltd. to UPDA which utilized that sum further for payments to various public servants and politicians. It is further noticed that the Association UPDA acted as a Nodal Agency for making these illegal payments for and on behalf of their member Distilleries. The details of such illegal /unaccounted payments on the basis of these documents coupled with various other details /information which are not allowable as expenditure under the Income Tax Law. The same are tabulated as under:-
Sl. Name of the 2002-03 2003-04 2004-05 2005-06 (till Total ( in No. Distillery * 14.2.2006) Lakhs)
1. Saraya 945 1045 527.5 690 (saraya 3207.5 and
2. Unnao 804 1134 636.9 889.6 Balrampur) 3464.5
3. NIC (National) 327 359 242.4 348.6 1277.0
4. Narang 61 153 105.1 235.7 554.8
5. Pilkhani and 214.4 333.1 185 214 947.0 Shamii
6. Modi 21 125 149.7 308.8 604.5
7. Superior/ITRC 6 46 34.7 233.6 320.3
8. Simbhaoli 298 472 278.5 583.1 1631.6
9. Cooperative 150 182 99.8 194.8 626,6r
10. Kesar (Baheri) 419 317 176.3 245 1157.3 11 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
11. Daurala(DCM) 374 1453 310.2 448.6 1585.8
12. Rampur 752 945 599.4 705.6 3002
13. SSL Mansurpur 463 607 374.8 591 2035.8
14. M. Meakins 202 334 204.2 275.6 1015.8
15. Lords (DK Modi) 582 616 404.9 486.9 2089.8
16. Balrampur 298 328 244.5 870.5
17. Central 22 44 32.4 98.4
18. Majhola - - - 72.5 72.5 Shamii and Pilkhani Distilleries both are the units runs by M/s Sir Shadi Lai Enterprises Ltd., T herefore, from the above chart it is clear that M/s Sir Shadi Lai Ente rprise s Ltd., has paid a sum of Rs. 9,46,99,700/- during the financial years 2002-03, 2003-04, 2004-05 and 2005-06 relevant to the assessment years 2003-04, 2004-05, 2005-06 and 2006-07."
15. After examination of the seized mate rial and after giving an opportunity of being heard, the Assessing Officer taxed an amo unt of Rs.3,33,13,300/- u/s 69C of the Income Tax Act, 1961. The ld. CIT (A) confirmed the addition.
16. Before us, during the arguments the ld. AR argued that this matter stands cove red by the orde rs of the Tribunal in the related cases. We brought to our notice the page no. 81 & 82 of the order of the ITAT in ITA No.2678 & 2679/Del/2011 wherein the relevant issues have been discussed at page nos. 36 to 58.
17. During the argume nts before us, the ld. DR argued extensively about the order of the Hon'ble High Court, regarding the seized material, non-consideratio n of seized material during the earlie r proceedings, the order of the ITAT in the case of Mohan Meakins Ltd. in ITA No. 3787/Del/2008, findings in case of proceedings u/s 12AA in case of UPDA. The submissions of the ld. DR is as under:
12 ITA Nos. 5727 & 5728/Del/2014Sir Shadilal Enterprises Ltd.
"A search and seizure action was conducted on 14.02.2006 at the residence o f Sh R.K.Miglani, General Secretary UPDA, fro m where various incriminating documents were seized vide Annexure A-1 to A-10. The search warrant at the residence of Sh. R.K.Miglani contained name of M/s UP Distillers Association (UPDA) and hence proceedings u/s 153A were initiated in the case of UPDA. Hence, Annexures A-1 to A-10 constitute material seize d fro m residence of Sh. R.K.Miglani during the course of search in the case of UPDA.
On the same date i.e. 14.02.2006, a survey u/s 133A was conducte d at the premises of M/s Uttar Pradesh Distillery Association (UPDA) from where various incriminating documents were seized vide Annexure A- 1 to A-9.
The Asse ssing Officer in the case of all assessments u/s 153C in cases of all 11 Distilleries has attached Annexure A (Containing pages 1 to 175) & Annexure B (containing pages 1 to 75 ) as annexure to the assessment orders. The assessees have not filed these Annexures to the assessment orders in the appeals before appeals to Ld.CIT(A), Hon'ble ITAT or Ho n'ble High Court which is mandatory. Failure to file the se annexures makes these appeals defective. T he onus is upon the assessees to file these annexures which has not been discharged. At this stage , the assessee cannot claim ignorance by stating that it did not receive these Annexures, particularly when they contain copy of incriminating seized material seized during search and relied upon by AO.
A. CASE OF THESE 11 DISTILLERIES IS DISTINGUISHABLE FROM ORDER OF HON'BLE ITAT IN ITA NO. 3787/DEL/2008:
The case of above 11 distilleries is distinguishable from that of M/s Mohan Meakins Ltd. Decided by Ho n'ble ITAT in ITA no. 3787/Del/2008 dated 01.08.2017 as follows:
(i) In the orde r of Hon'ble ITAT in the case of Mohan Meakin Ltd. Vs ACIT (ITA No . 3787 TO 3790/Del/2008), 13 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
there was mention of seized papers annexure A-1 to A- 10 which were produced at the time of hearing. However, there was no examination of entries in these seized pape rs. What was examined was whether these seized documents belong to the assessee or not. Hence, it would be incorrectly held that these documents had already been considere d in the first round of appeal proceedings.
(ii) A perusal of assessment orders in the case of Mohan Meakins Ltd. sho ws that there was no mention of Annexures to the assessment order. Howe ver, in the prese nt cases, the assessment orders clearly mention Annexures containing incriminating docume nts seized during search.
(iii) Hon'ble Delhi High Court vide order dated 22.01.2015 held as follows:
"5. The Revenue urges that the AO and the CIT(A) took note of not merely the document which listed out the payments made in a tabular fo rm for different purposes, but also other documents and materials in the form of production figures, the state ment of Mr. R.K. Miglani, and the circumstance that the production figures coincide with the figures available with the Reve nue in the pending proceedings. It appears that the Tribunal has not rendered any specific fi ndings on the status of such documents. For instance, if the productio n figures were in fact forwarded by the concerned unit under a letter or some other form connecting it with the material form seized, infe rence would be of particular kind.
(iv) The directions of Hon'ble Delhi High Co urt have not been followed in the subsequent conse quential order of ITAT. Hon'ble Delhi High Court had specifically directed to give specific findings on the status of such documents which has not been done.
In Para 6.4 of the Assessment o rder, the AO has pointed out how production figures of assessee's books have been found to match with seize d mate rial at R.K.Miglani's residence.
14 ITA Nos. 5727 & 5728/Del/2014Sir Shadilal Enterprises Ltd.
B. NON CONSIDERATION OF SEIZED MATERIAL BY HON'BLE ITAT AS DIRECTED BY HON'BLE DELHI HIGH COURT:
The Assessing Officer has specifically relied upon incriminating seized documents Annexure A, Pages 1 to 175 & Annexure B, Pages 1 to 75. These pages were not considered in the ITAT order of Mohan Meakin Ltd in ITA no. 3787/Del/2008 dated 01 .08.2017 (Copy Enclosed). These incriminating documents clearly prove that the production figures mentioned in them pertained to the Distilleries. Some documents also bear signatures of representatives of the Distilleries.
............
D. FINDINGS IN THE CASE OF PROCEEDINGS U/S 12AA IN THE CASE OF UPDA:
The CIT-III, Ne w Delhi vide order dated 16.11.2009 passed order u/s 12AA of IT Act & cancelled registration granted to UPDA. The cancellation of registration u/s 12AA was upheld by ITAT vide orde r in ITA No 118/Del/2010 dated 14.02.2017 (Copy enclose d). The relevant findings of Hon'ble ITAT are reproduce d in detailed discussion below.
In the above judgment, Hon'ble ITAT has upheld cancellatio n o f registration u/s 12AA and also endorsed following findings of the Assessing Officer:
(i) Upheld validity of statement on oath of Sh RK Miglani recorded u/s 132(4) o n 14.02.2006 despite his retraction vide letter dated 03.03.2008 and de spite no cross examination of Sh RK Miglani by the assessee.
It was held as follows:
(ii) The search at the reside nce of Sh RK Miglani was a valid search and incriminating documents seized could be relied upon by the Department. In Para 12 it was held that the all the activities under the documents seized are solely attributable to the assessee association as such we find that the CIT is perfectly justified in recording his satisfaction that the 15 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
activities of the assessee Association are neither genuine and nor are being carried out in accordance with the object of the association.
(iii) The order u/s 12AA was passed cancelling registration of the assessee primarily due to the fact that the assessee was found to have made illegal payments to bureaucrats and politicians.
The appeal of M/s UPDA against above ITAT order was dismissed by Hon'ble High Court vide orde r dated 23.10.2017 (copy enclosed) & SLP against the same was dismissed by apex court on 13.04.2018 (Copy enclose d).
Since the above issues have been decided by Hon'ble ITAT and affirmed by Hon'ble Delhi High Court as well as Hon'ble Supreme Court, the se issues cannot no w be revisite d in these proceedings.
E. EVERY POSSIBLE EFFORT WAS MADE BY THE ASSESSEE TO ALLOW CROSS EXAMINATION OF SH. R.K.MIGLANI Detailed discussion given below F. Strong Reliance upon the state ment on oath of Sh. R.K.Miglani recorde d u/s 132(4) on the date of search. With regard to evidentiary value of statement recorded u/s 132(4) reliance is placed upo n following judgme nts:
(i) Kishore Kumar Vs CIT (62 taxmann.com 215, 234 Taxman 771) (Copy Enclosed) B Kishore Kumar Vs CIT (52 taxmann.com 449) Madras High Court confirmed (Copy Enclosed)
(ii) Bhagirath Aggarwal Vs CIT (31 taxmann.com 274, 215 Taxman 229, 351 ITR 143) (Copy Enclosed)
(iii) CIT Vs M. S. Aggarwal [2018] 93 taxmann.com 247 (Delhi) (Copy Enclosed)
(iv) Smt Dayawanti Vs CIT [2016] 75 taxmann.com 308 (Delhi)/[2017] 245 Taxman 293 (Delhi)/[2017] 390 ITR 496 (Delhi)/[2016] 290 CTR 361 (Delhi) (Copy Enclosed) 16 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
(v) M/s Pebble Investment and Finance Ltd Vs ITO (2017-TIOL-238-SC-IT) (Copy Enclosed) M/s Pebble Inve stment and Finance Ltd Vs ITO (2017- TIOL-188-HC-MUM-IT) Bombay High Court confirmed (Copy Enclosed)
(vi) Greenview Re staurant Vs ACIT [2003] 133 Taxman 432 (Gauhati)/[20 03] 263 ITR 169 (Gauhati)/[2003] 185 CTR 651 (Gauhati) (Copy Enclosed)
(vii) Raj Hans Towers (P.) Ltd. Vs CIT (56 taxmann.com 67, 230 Taxman 567, 373 ITR 9) (Copy Enclosed)
(viii) PCIT Vs Avinash Kumar Setia [2017] 81 taxmann.com 476 (Delhi) (Copy Enclosed) G. On the basis of documents seized from residence of Sh.R.K.Miglani, M/s Radico Khaitan Limited surrendered Rs. 27.50 cr. before Settlement Commissio n as against unaccounte d payme nts of Rs. 30.02 cr. found recorded.
H. On the basis of documents seized from residence of Sh.R.K.Miglani, M/s Balrampur Chinni Mills Limited surrendered Rs. 8.90 cr. in its revise d returns as against Rs. 8.70 cr. found recorde d.
I. Similar incriminating documents were also seized from laptop of Sh Ajay Aggarwal, GM of M/s Radico Khaitan Limite d.
II.
J. Saraya Industries Ltd had filed writ petition in Delhi High Court (171 Taxman 194) against proceedings u/s 153C which was dismissed. The findings of Ho n'ble Delhi High Court are reproduced in assessment order.
K. In view of the provisions of Section 132(4A) & 292C of I.T.Act, the onus is upon the assessee to show that the notings on the seized papers are incorrect. Reliance is placed on decisio ns given below
1. In the above cases, validity of procee dings u/s 153C had been challenged. Hon'ble ITAT vide order dated 23.11.2012 quashed the assessments on the ground that seized material did not belong to the assessee.
17 ITA Nos. 5727 & 5728/Del/2014Sir Shadilal Enterprises Ltd.
The fact that Hon'ble Delhi High Court has set aside these proceedings with specific directio ns clearly shows that Hon'ble High Court has not accepted plea of the assessee that the seized mate rial did not belong to them. Reliance is placed upon judgments given below.
DET AILED DISCUSSION:
A. CASE OF THESE 11 DISTILLERIES IS DISTINGUISHABLE FROM ORDER OF HON'BLE ITAT IN ITA NO. 3787/DEL/2008:
In the above case, Hon'ble ITAT Delhi vide order dated 23.11.2012 allowe d the appe als of the assessee and quashed the assessments u/s 153C on the ground that no docume nts belonging to the assessee were found and therefore no assessment u/s 153C can be framed in their cases.
The above conclusion was arrived at primarily by relying upon decision of Ho n'ble ITAT Bangalore in the case of DCIT Vs Unite d Spirits Limited (ITA NO. 1375 to 1378/Bang/2010) It may be pointed out that in the entire above order of Hon'ble ITAT, there was me ntion of seized papers annexure A-1 to A-10 which we re produced at the time of hearing. However, the re was no e xamination of entries in these seized papers. What was examined was whether these seized documents belong to the assessee or not.
1. Hon'ble Delhi High Court vide order dated 22.01.2015 held as follows:
"5. The Revenue urges that the AO and the CIT(A) took note of not merely the document which listed out the payments made in a tabular fo rm for different purposes, but also other documents and materials in the form of production figures, the state ment of Mr. R.K. Miglani, and the circumstance that the production figures coincide with the figures available with the Reve nue in the pending proceedings. It appears that the Tribunal has not rendered any specific findings on the status of such documents. For instance, if the 18 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
productio n figures were in fact forwarded by the concerned unit under a letter or some other form connecting it with the material form seized, infe rence would be of particular kind.
B. NON CONSIDERATION OF SEIZED MATERIAL BY HON'BLE ITAT AS DIRECTED BY HON'BLE DELHI HIGH COURT:
In this regard, it is submitted that the following seized documents clearly prove the fact that the incriminating documents found from pre mises of Sh RK Miglani pertain to the distilleries as well:
(i) Page 114, Annexure A-1 has the heading "Total account upto date 02-03, 03-04, 04-05 upto Feb 05".
It re cords payment re ceived from different distilleries and payments to differe nt persons/heads. It has been signed by RK Miglani and representatives of Lo rd & Saraya Industries "Total account upto date 02-03, 03- 04, 04-05 upto Feb 05". It records payment received from differe nt distilleries and payments to different perso ns/heads.
It has been signed in original by the following:
Mr. RK Miglani- general Secretary, UPDA Vishal Shrivastava- Represe ntative of M/s Lord Distilleries Mr. Atual K. Singh-Representative of M/s Lord Distilleries Mr. H.R. Wadhawa - Re presentative of Saraya Industries The assessing officer has referred to a large number of incriminating documents found during search in his assessment order. It is categorically stated that the annexures to the assessment order were not considered in the first round of appeal proceedings. The annexures to the assessment order contain details of production figures of the assessee which was found to tally with documents seized from the premises of Sh R.K. Miglani as directed by Hon'ble Delhi High Court.19 ITA Nos. 5727 & 5728/Del/2014
Sir Shadilal Enterprises Ltd.
The following incriminati ng documents mentioned in the assessment orders clearly prove the fact that these papers belonged to the distilleries:
Annexure to Seized Details contained in seized Document Page of Assessment Assessment Order Document order (A.Y.2003- 04) -
-Pages Annexure where mentioned 8 Annexures seized from UPDA Office 10 10 Annexures seized from Residence of Sh. 10 Miglani Summary of illegal/unaccounted payments 3
made by various distilleries on the basis of seized documents Annexure A, Pages A-2, Page 11 & 67 List of Core Committee members 7 46 to 47 Annexure B Pg 1- Important Large computer generated sheets in which 10 75 details of production of country liquor by pages individual distilleries and contribution to UPDA by each member and basis of calculation Annexure B Pg 65- Specimen copies of weekly records maintained 10 75 Annexure B Pg 22 A-3, Page 81 Total country Liquor produced by each 10 distillery, then converted into no. of cases.
Contribution by each distillery is calculated @ Rs.20 per case ( Total Rs. 36,94,410) Annexure-B Pg 14 A-2, Page 69 "All Account April 2005 to January 2006". 11 This is detailed account of money due from each distillery and received in each month.
Annexure B Pg- A-3,Page 78 " Distribution of 4.5 crore". In this, name of 11 24,25 distillery, actual supply by
each distillery, amount to be collected and amount received Annexure B Pg 30 Detail calculation sheets for F.Y. 2003-04 and 11 &31 2004-05 giving details of dispatch schedule of each distillery and amount to be collected from Annexure B Pg 51 Detailed account of Modi Distillery as on 11 23.04.2004 Annexure B A-1 ,Page 123 Money received from members for period April 11 Pg 2 to December 2004 for each distillery Annexure B Pg 5 A-1, Page 115 "Old Govt. Account of 2.00 crores". It shows 12 collection were for purposes of further payments to bureaucrats and politicians Annexure B Pg 17 A-2 , Page 43 "Overhead Expenses distillery Monthly". It 12 shows regular payments to district Excise Officer, Dy. Excise Commissioner, Inspector, Annexure B Pg 4 A-1, Page 118 Shows use of funds upto March, 2005 of Rs. 12 11,24,07,500 Annexure B A-1, page 103 " Summary of Payments" upto February 2005 12 Pg 8 Annexure B Pg 9 A-1, page 94 "Payments made AKG" and Payments made to 12 GDY"
20 ITA Nos. 5727 & 5728/Del/2014Sir Shadilal Enterprises Ltd.
Annexure B Pg 6 A-1, Page 114 "Total Account upto Date 2002-03, 2003- 12 04,2004-05 upto February 05" it records payments received from different distilleries Annexure B Pg 13 List of distilleries with name of persons as 13 representatives & their telephone no.A-9 Production Figures 17 A-4 (UPDA) Production Figures 17
A-3, Page 94 A-6, Total country Liquor produced by each 17 Page 3 distillery, then converted into no. of cases.
Contribution by each distillery is calculated @ Verification of Production Figures as per 17 assessee and documents seized from premises of R.K.Miglani Annexure A Pg 56 Revised working of generation/ expenditure in 24 cash for F.Y. 2004-05 A-2, Page13 Rs. 2.63cr. have been paid by M/s Saraya 25 (assessee Industries Limited to UPDA.
premises) A-2, Page 69 Amount received from the assessee by UPDA 25 Annexure A Pg 61 A-2,Page 57 Fax dated 26.10.2005 from Sh. K P Singh 25 marked as 'Final'. It contains details of share of investment of all distilleries during the year 2 pages seized from Contains details of monthly illegal payments for 22 laptop of Ajay F.Y. 2004-05 which match with pages showing Aggarwal details seized from Sh.R.K. Miglani In this regard, Hon'ble ITAT Delhi in the case of Mohan Meakin Ltd. Vs ACIT (ITA No. 378 7 TO 3790/Del/2008) in para 5.7 of its order held as follows:
"5.7 Even at the risk of being repetitive, we record that in spite of view of the directions of the Ho n'ble High Court and despite the fact that the revenue produced only Annexures A-1 to A-10 found fro m the premises of Shri Miglani , which was already on record before the ITAT, a specific query, was raised by the Bench to the learned CIT DR, that apart from the aforesaid, whether there is any other docume nt which has been made the basis of recording of the satisfaction note and also the addition made in the order of assessment, and learned CIT DR has submitted that apart from the aforesaid, there are no other documents which had been made the basis of initiation of the procee dings as well as fo r making the addition. He was also asked to show any such document seized fro m the premises of searched perso ns, which could sugge st that any production 21 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
figure was fo rwarded by assessee "as was conte nded by Revenue before Hon'ble High Court". In response, the learned CIT DR placed reliance on the seized annexures A-1 to A-10, fo und from the residential premises ofSh. R.K. Migalni during the course of search on 14.02.2006 and refe rred to vario us pages of seized annexures. Ho wever, nowhere, the learned CIT DR has been able to show any such document, which could suggest that any document showing pro duction figures was in fact forwarded by the assessee to Sh. R.K. Miglani or M/s UPDA. He again placed reliance on the statement of Sh. R.K. Miglani recorded during the search on his residential premises and also at the business premises of M/s UPDA, wherein Sh. Miglani had stated that production figures had been recorded by him on the basis of fax messages forwarded by various member distilleries of UPDA. However, not even one such alleged fax message with regard to the assessee has been produced before us by the revenue as seized annexure does not contain any such document. These arguments placed by learne d CIT DR have already be en dealt by Tribunal in the first round of proceedings and nothing new has been bro ught on record by the Revenue even though specific plea was raised by the Revenue before the Hon'ble High Court of Delhi."
Thus, Hon'ble ITAT allowed relief on the following two grounds:
(i) Annexures A-1 to A-10 found from premises of Sh R.K. Miglani were already on record and had already been considered in the first round of proceedings
(ii) That the department failed to produce seized documents which could suggest that any production figure was fo rwarded by assessee "as was conte nded by Revenue before Hon'ble High Court."
In this regard, it is submitted as follows:
(i) In the orde r of Hon'ble ITAT in the case of Mohan Meakin Ltd. Vs ACIT (ITA No . 3787 TO 3790/Del/2008), there was mention of seized papers annexure A-1 to A-22 ITA Nos. 5727 & 5728/Del/2014
Sir Shadilal Enterprises Ltd.
10 which were produced at the time of hearing. However, there was no examination of entries in these seized pape rs. What was examined was whether these seized documents belong to the assessee or not. Hence, it would be incorrect to state that the se documents had already been considere d in the first round of appeal proceedings.
(ii) In this regard, reliance is also placed on the decision of Hon'ble Delhi High Court in the case o f PCIT Vs Super Malls Pvt Ltd [2016] 76 taxmann.com 267 (Delhi)/[2017] 393 ITR 557 (Delhi)/[2017] 291 CTR 142 (Delhi) (Copy Enclosed) where Ho n'ble Delhi High Court held that where Assessing Officer had issued satisfaction note under section 153C after satisfying himself with co nte nts of documents seized, Tribunal could no t declare it as invalid on hyper technical ground of incorrect terminology used in said note. Satisfaction note recorded u/s 153C in re spect of the assessee, being the third party, could not be said to be invalid on a hyper technical ground by interpreting the expression "belonging to " too literally.
In vie w of the above facts, it would amount to going against decision of Hon' ble Delhi High Court if the assessments are again quashe d on the ground that annexure A-1 to A-10 do not belong to the assessee.
FINDINGS IN THE CASE OF PROCEEDINGS U/S 12AA IN THE CASE OF UPDA:
1. The CIT-III, New Delhi vide order dated 16.11.2009 passed order u/s 12AA of IT Act & cancelled registration granted to the assessee. The cancellatio n of registration u/s 12AA was upheld by ITAT vide order in ITA No 118/Del/2010 dated 14.02.2017. The relevant findings of Hon'ble ITAT are reproduce d below:
"9. Now we'll have to see whethe r Mr Miglani has anything personal in doing all these things. Is an admitted fact that he is the Secretary Gene ral of the assessee association during relevant period. The statement of Mr Miglani clearly establishes that all the 23 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
transactions covered by the documents which are confronted to him are in pursuance of the interest of the members of the assessee Association and there is nothing perso nal inte rest involved in it. In such a situation the natural inference that follows is that it's not as though Mr Miglani was acting in his pe rsonal capacity but he was acting in furtherance of the interest of the members of the assessee Associations. In such a situation it is no t permissible for the assessee to say that whatever Mr Miglani has done by way of the transaction covered under these documents , was done in his individual capacity. Should there be any perso nal benefits to Mr. Miglani de horse the interest of the members of the Association, such an arguments would hold water. But in this matter it seems that all the transaction covered under the seized documents we re in furtherance of the me mbers of the Association, maybe by way of illegal means.
10. Amounts were received from me mbers and a records is also contain the details of expenses to be incurred by each members of the assessee with the expenses attributable to various e mbers of the assessee. When the persons o wning the distillers came to from into an Association for furtherance of their interests, it cannot be said that whatever the office bearer of such an Association and the me mbers have done in furtherance of such interest have do ne so in their personal capacity. Should it be so, there is no purpose of for forming into an Association and is seeking Registration thereof. Any arguments which attributes redundancy to the purpo se of forming an association, o n the face of the reality that an Association was in fact formed, cannot be countenanced. A reading o f the statement of Mr Miglani clearly established the there's nothing pe rsonal conducted by him in the transaction covered by the documents reco vered during the search and seizure ope rations and in all those transactions Mr Miglani and so many members of the assessee Association are involved, as such the irresistible inference that flows is that only under the colour of the Association and in the capacity of the office beare r Mr Miglani coordinated all these activities, as such there is no escape for the 24 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
assessee to say that these activities are not attributable to the assessee Association or that tho se are conducted by Mr Miglani in his individual capacity.
11. Now coming to the arguments that the statement not testified in cross-examination cannot be relied upon, it is the arguments of the Ld. AR that the assessee could not be asked to pro duce a 3rd person on whose a statement of the Department intended to rely. At this juncture it shall not be forgotten that besides being an individual conducting his own affairs, Mr Miglani also happens to be the Secretary Gene ral of the assessee Association at relevant pe riod. Whatever may be the capacity of Mr Miglani while making the statement u/s 132(4) of the Act, but when the assessee was required to produce its own Secretary General for the purpose of clarification as to the stand that the trust is cove red by and/or is an eligible for registration u/s 12A of the Act, and when the interest of the assessee is at stake from which the assessee could have bailed itself out be producing its own Secretary General before the Department to say that the transitions covered under the documents seized during the se arch and seizure operatio ns were conducted in his individual capacity but not as Secretary General, there is no reason as to why the assessee is failed to do so. Further the stand taken by the assessere before the authorities is not on the lines argued before us by the Ld. AR. The ground for non- productio n of Secretary General of the assessee association was something different. It is not o pen for the assessee to say that Mr Miglani is a third person as though he has nothing to do with the assessee association.
12. The search and seizure operation were conducted o n 14.02.2006 and the statement was recorded on the date itself. As per reply dated 29.02.2009 filed by the assessee before the CIT, it is only by letter date d 03.03.2008 Mr. Miglani retracted his statement, stating that there was coercion while recording the statement on 14.02.2006. In the circumstances, the best opportunity was given to the assessee was to produce its Secretary General before 25 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
the autho rities for giving clarification on this aspect. Retraction of any statement more than two years after its original making does not carry much weight. Further there is no acceptable explanation as to why the asse ssee was not producing its Secretary General before the authorities to give a clarification as to his stand viz-a-viz the stand of the assessee. In the se circumstances, we hold that the activities of Mr Miglani covered by the documents that were seize d and confronted him were intimately relating to the common interest of the members of the association and he coordinated all such activities not in his individual capacity but o nly as the Secre tary General of the association, for othe rwise there is no occasion fo r him to indulge in such activities. We , therefo re, hold that the all the activities under the documents seized are solely attributable to the assessee association as such we find that the CIT is perfectly justified in re cording his satisfaction that the activities of the assessee Association are neither genuine and nor are being carried out in accordance with the object of the association."
In the above judgment, Hon'ble ITAT has upheld cancellatio n o f registration u/s 12AA and also endorsed following findings of the Assessing Officer:
(i) Upheld validity of statement on oath of Sh RK Miglani recorded u/s 132(4) o n 14.02.2006 despite his retraction vide letter dated 03.03.2008 and de spite no cross examination of Sh RK Miglani by the assessee.
It was held as follows:
(ii) The search at the reside nce of Sh RK Miglani was a valid search and incriminating documents seized could be relied upon by the Department. In Para 12 it was held that the all the activities under the documents seized are solely attributable to the assessee association as such we find that the CIT is perfectly justified in recording his satisfaction that the activities of the assessee Association are neither genuine and nor are being carried out in acco rdance with the object of the association.26 ITA Nos. 5727 & 5728/Del/2014
Sir Shadilal Enterprises Ltd.
(iii) The order u/s 12AA was passed cancelling registration of the assessee primarily due to the fact that the assessee was found to have made illegal payments to bureaucrats and politicians.
The appeal of M/s UPDA against above ITAT order was dismissed by Hon'ble High Court vide order dated 23.10.2017 (copy enclosed) & SLP against the same was dismissed by apex court on 13.04.2018 (Copy enclose d).
Since the above issues have been decided by Hon'ble ITAT and affirmed by Hon'ble Delhi High Court as well as Hon'ble Supreme Court, the se issues cannot no w be revisite d in these proceedings.
E. CROSS EXAMINATION OF SH. R.K.MIGLANI
(i) Eve ry possible effort made to allow cross examination With regard to cross examination of Sh R.K.Miglani, as mentioned in para 4.4 of the assessment orde r, summons u/s 131 were issued to him on 01.03.2006, 10.08.2006, 30.11.2007, 04.08.2008 & 17.10.2008 during post search investigation as well as during assessment proceedings. Every effort was made by the department to allow cross examination. Ho wever^Sh R.K.MigIani did not appear for cross examination to assist the assessee who had employed him explicitly/ implicitly. On page 15 of the assessment order, AO has stated as follows:
'As already stated above, in view of these circumstances since Mr. Miglani is implicitly/ explicitly an employee of the assessee (the assessee being a member of UPDA) & Mr. Miglani acts and works under the whims of the membe rs of UPDA what postulates is that he is no t appearing for cro ss examination under the influence and if the assessee wants to take any benefit from his cross examination, it was quite open for the assessee to produce Sh Miglani for such cross examination In this regard, reliance is placed upon the judgme nt of Hon'ble Supreme Court in the case of ITO 27 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
Vs M. Pirai Choodi (f2012l 20 taxmann.com 733 (SC)/f2011l 334 ITR 262 (SC)/r20111 245 CTR 233 (SC) (Supreme Court) (Copy Enclosed) whe re Hon'ble Supreme Court held that order of assessme nt passed without granting an opportunity to assessee to cross-
examine, should not have been set aside by High Court: at most. High Court should have directed Assessing Officer to grant an opportunity to assessee to cross-e xamine concerned witness.
(ii) Statement of Sh. R.K. Miglani at his residence u/s 132(4) & 133 A at the office premise o f UPDA of IT Act supports the view that the above seized documents belong to the members of UPDA including the appellant.
Specific instances are quoted as under:-
(a) Answer in response of Q.3 of Sh. R.K.Miglani at the office of UPDA during 133A proves that the complete data of dispatch was receive d from the members. Answer question no. 5 during survey states that the data received from his residence are related data taken out from drive 'F' from the computers at the office, therefore, the data of dispatch seized from the residence is prepared on the basis of fax rece ived from the members of UPDA including the appellant.
(b) Answer to Question No .8 at reside nce u/s 132(4), Sh. R.K. Miglani has stated that it received data of dispatch from the members of UPDA including the appellant on weekly basis.
(c) Vide answer question No. 10 to 24 during his statement u/s 132 (4) at his residence, Sh. R.K. Miglani has stated that seized documents contains the figure o f details of illicit payment made various Govt.
Officer and Politicians by various members and its computation based on the quantity of dispatch received from the members of UPDA.
(d) The details of illegal payme nt made by the member of UPDA in during the appellant to vario us Govt, authority we re received from core distillery by 28 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
Sh. R.K. Miglani refe r to Question and answer No 13 of Sh. R.K. Miglani.
In view of specific dispatch data received from the member of UPDA and details of illegal payment by various me mbers of UPDA, maintained by Shri Miglani on the basis of such dispatch figure belong to the appellant, the entry of dispatch belongs to the appellant and are part of the bo oks of accounts of the appellant, which has been provided to UPDA for specific purposes for computing the facilitation money given to Govt, officers /politicians. These documents are fo r various F.Y's. maintained monthwise/yearwise. Therefore, these documents belong to the various members of UPDA jointly. Each members of UPDA partially owns these documents containing data of dispatch of co untry made liquor and computation of illicit payment made to Govt. Officers/politi cians, and details of such money received and amount due. In any case, these documents cannot be said to belong to Sh. R.K. Miglani or UPDA as these two pe rsons are not engaged in the business of manufacturing of country liquo rs. Therefore on this ground also belongingness/ownership of these paper lie with the member of UPDA needless to mention that name of members o f UPDA is specifically mentioned on various seized documents and Sh. R.K. Miglani has explained that these documents specially dispatch figure was received fro m members.
(iii) Not providing cross examination of Sh. R.K. Miglani is irrelevant:--
Ld. AR has relied on various judicial pro nouncements that statement without cross examination cannot be considered as evidence. T hese judicial pronouncements are distinguishable on facts as in those cases witness was independent and not related person. In present case as Sh. R.K. Miglani is Secretary General of UPDA in which the appellant is a member. Therefore, if the statement of Sh. R.K. Miglani whi ch was adverse to the member was untrue than immediately Sh. R.K. Miglani could have bee n removed from the post of Secretary General, UPDA, or Sh. R.K. Miglani could have brought 29 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
before I.T. Authority for retraction or modification of statement.
Further, statement of Sh. Miglani is not on stray/dumb documents but contains the figures of dispatch and amo unt of illegal payment made by members which is clear from the notings of the seized documents. Therefore, Sh. Miglani has only confirmed the specific variation contained in the seized material.
Still further, Sh. R.K. Miglani being employee of UPDA is an interest person and associates of the members of UPDA. Therefore, the appellant and other membe rs of UPDA could itself has produced Sh. R.K. Miglani, if his statement was untrue and could not have waited for the revenue to offer cross examination.
(iv) Retraction o f Sh. R.K. Miglani has no evidential value on the following grounds:-
(a) Retraction of Sh. R.K. Miglani was made after two years from the statement recorde d u/s 132(4). Therefore it is after thought.
(b) The retraction of statement was not submitted before the Assessing Officer but before CIT(C)-l 11, Delhi, during the proceeding fo r withdrawal of registration u/s 12AA(3) in case of UPDA. Further, the date o f affidavit in just one day prior to submission before CIT (c)-lll during the pro ceeding u/s 12AA(3) this also proves that such retraction was necessitated because of threat of cancelation of registration u/s 12AA(3). The refore on this basis also, it is afterthought. T he result and furthe r investigation in such retraction has not been submitted.
(c) The appellant has filed this retraction of Sh.
R.K. Miglani first time as fresh evidence and has not submitted the same in appellate proceeding in first till Hon'ble High Court. The Ld. AR has neither filed certified copy nor produced Sh. Miglani in person, therefore, this fresh evidence should not be entertained.
30 ITA Nos. 5727 & 5728/Del/2014Sir Shadilal Enterprises Ltd.
(d) The most important aspect of re traction is that during statement, Sh. R.K. Miglani has explained the appare nt contents of seized document. In retraction Statement he has not submitted the meaning of the contents of such seize d docume nts, othe rwise.
(v) Findi ngs in the case of UPDA by the AO are relevant:-
Ld. AR's argument that AO in the case of UPDA has held in Para 10(b) that the seized document belong to UPDA and therefore does not belong to the members. This finding is not factually co rrect as AO of UPDA in Para 6.15 has himself held that these documents belong to the me mbers.
Further, UPDA is not manufacture of Alcohol, therefore question of dispatch of Alcohal in UPDA's case has no meaning. Therefore , essentially all computation and receipt o f money and reimbursement based on such dispatch belong to membe rs of UPDA who are in Alcohal manufacturing business.
(vi) Findi ngs of CIT(A) in appellant's case :
Findings of CIT(A) in appellant's case in the order that the document pertains to the appellant firstly does not prove that the se documents do not belong to appellant as finally CIT(A) has dismissed the appeal and held that these documents belong to the appellant and therefore Section 153C has rightly been invoke d.
Further words 'pertains to' is a bigger set and 'belonging to' is submerged in that bigger set.
(vii) Ld. AR's argument that stateme nt of Sh. Ashok Dutt & Sh. Rahul Jain of M/s PDL that the financial power vests with appellant cannot be relied as cross examination was not offered, cannot be accepted.
In this case also Sh. Ashok Dutt & Sh. Rahul Jain was the employee of PDL the refore, these persons we re not inde pendent witness but business associate of the appellant with whom the appellant continued its business even after giving adverse statement. In these 31 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
circumstances as witness was not indepe ndent, judicial pronouncements relied by Ld. AR for providing opportunity of cross examination to treat statement as evidence will not apply in present case.
Further, PDL admittedly was only supervising the Lucknow Plant with two persons. Plant was run by the employees of the appellant, plant & machine ry of the appellant and sales are effe cted by the head of the appellant. These are undisputed facts. Further the appellant is a member of UPDA and not PDL. The refore, unaccounted expense incurred has to be borne by the appellant and not PDL.
(viii) Ld. AR's argument that in the case o f Radico Khaitan, in the order of u/s 245D(4), Settlement Commissio n have not accepted Rule 9 report of CIT(C)- lll for enhancement of income by the figure of unaccounted payme nt as per seized document. A perusal of order u/s 245D(4) reveals that as per order total income settled in the case of M/s Radico Khaitan was for Rs. 30 crores. The so urce & basis of initial offer is not discussed in the order. Undisputedly, the M/s Radico Khaitan has filed application before Settlement Co mmission on the basis of search conducted in its case as well as at R.K. Miglani's premises. The only finding of search is in respect of unaccounted payment made by the membe rs of UPDA. Therefore acceptances of additional income before Settlement Commission confirm unaccounted payment.
(ix) If Hon'ble ITAT confirm, legality of the proceedings u/s 153C in appellant's case, quantification of unaccounted payment can be restored to the AO on the basis of seized document and other evidences, books of accounts impounded during survey u/s 133A in UPDA's o ffice and statement o f Sh. R.K. Miglani, if any mistakes are found in figure either in the satisfaction u/s 153C or quantification of income while passing assessment order."
It is further submitted as follows:
32 ITA Nos. 5727 & 5728/Del/2014Sir Shadilal Enterprises Ltd.
1. During the course of assessment procee dings, details of pro duction and dispatch figures of all assessees was compared with the figures found recorded in the seized documents. The figures on the seized documents were found to almost tally with the figures in the books of account of the assessee .
2. As a sample, copy of page s 32 and 33 of assessment order in the case of M/s Shadilal Enterprises Ltd. are enclosed where the figures are found to tally.
Hon'ble Delhi High Court had given specific direction to verify whether productio n figures of the assesses match with the documents seized from residence o f Sh. R. K. Miglani. This answers an important query raised by Hon'ble Delhi High Court.
3. The Departme nt has produced a number of evidences in support of the fact that the Distilleries had made unaccounted payments to UPDA. In this regard, reliance is placed upon the decision of Sumati Dayal Vs CIT 214 ITS 801 (SC) where it was held that matters have to be considered in the light of human probabilitie s. Preponderance of probability is that the Distilleries had made unaccounte d payments to UPDA.
4. Presumption u/s 132(4A) & 292C is available in the case of 11 Distilleries since search was conducted in the case of UPDA and UPDA is nothing but a sum of its office bearers and the Distilleries.
Presumption u/s 132(4A) & 292C is available in the case of UPDA where assessment has been made u/s 153A. The amounts added in the hands of UPDA as unaccounted receipts are added in the hands of Distilleries as unexplained expenditure. Thus, if additions are sustained in the hands of UPDA in view of presumption u/s 132(4A) & 292C, these additions cannot be deleted in the hands of Distilleries.
It is humbly submitted that the following decisions may kindly be considered with re gard to validity of statement recorded u/s 132(4) of I.T. Act:
33 ITA Nos. 5727 & 5728/Del/2014Sir Shadilal Enterprises Ltd.
1. Kisho re Kumar Vs CIT (62 taxmann.com 215, 234 Taxman 771) (Copy Enclosed) where Hon'ble Supreme Court dismissed SLP against High Court's o rde r where it was held that since assessee himself had stated in swo rn statement during search and seizure abo ut his undisclosed inco me, tax was to be levied o n basi s of admission without scrutinizing documents.
B Kishore Kumar Vs CIT (52 taxmann.com 449) Madras High Court confirmed (Copy Enclosed)
2. Bhaqirath Aqqarwal Vs CIT (31 taxmann.com 274, 215 Taxman 229, 351 ITR 143) (Copy Enclosed) where Ho n'ble Delhi High Co urt held that an addition in assessee's inco me relying on statements recorded during search operations cannot be deleted without proving statements to be inco rrect.
3. CIT Vs M. S. Aqqarwal [2018] 93 taxmann.com 247 (Delhi) (Copy Enclosed) where Ho n'ble Delhi High Court held that where in course of block assessment proceedings, AO made addi tion to assessee's undisclosed income in respect of gift, in view of fact that assessee did not even know donor personally and, moreover, he himself in presence of his Chartered Accountant had made a statement under sec. 132(4) admitting that said gift was bogus, impugned addition was to be co nfirmed.
4. Smt Dayawanti Vs CIT [2016] 75 taxmann.com 308 (Delhi)/[2017] 245 Taxman 293 (Delhi)/[2017] 390 ITR 496 (Delhi)/[2016] 290 CTR 361 (Delhi) (Copy Enclosed) where Hon'ble Delhi High Co urt held that where inferences drawn in respe ct of undeclared income of assessee were premised o n materials found as well as statements recorded by assessee's son in course of search operations and assessee had not been able to 34 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
show as to how estimation made by Assessing Officer was arbitrary or unreasonable, additio ns so made by Assessing Officer by rejecting books of account was justified.
5. M/s Pebble Investment and Finance Ltd Vs ITO (2017-TIQL-238-SC-IT) (Copy Enclosed) where Hon'ble Supreme Court dismissed SLP challenging the judgment, whereby the High Co urt had held that statement made u/s 133A could be relied upon for purpo ses of assessment, in absence of any contrary evidence or explanation as to why such statement made was not credible.
M/s Pebble Inve stment and Finance Ltd Vs ITO (2017- TIOL-188-HC-MUM-IT) Bombay High Court confirmed (Copy Enclosed)
6. Greenview Restaurant Vs ACIT [2003] 133 Taxman 432 (Gauhati)/[20 03] 263 ITR 169 (Gauhati)/[2003] 185 CTR 651 (Gauhati) (Copy Enclosed) "From facts, it was clear that there was a delay on the part of the appe llant and its partner in retracting the statements recorded. The attention of the Court had also not been drawn to any material o n record to establish that any attempt was made on behalf of the appellant to prove the allegation of inducement, threat or coe rcion thro ugh the witnesses. Having examined the impugned o rde rs rende red by the Tribunal with the reasonings in support of its finding against the complaint of threat, induceme nt or coe rcion, no good and sufficient re ason was found to differ from it. In the facts and circumstances o f the case, having regard to the materials on record, the appellant had failed to establish that the statements of its partner had been recorded in the course of the search by using coercion, threat o r inducement. Hence, the contentions advanced by the appellant in that regard were dismissed and the conclusion of the Tribunal on that count was affirmed." [Para 9] 35 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
7. Raj Hans Towe rs (P.) Ltd. Vs CIT (56 taxmann.com 67, 230 Taxman 567, 373 ITR 9) (Copy Enclosed) where Hon'ble Delhi High Co urt held that where assessee had not offere d any satisfactory explanation regarding surrendered amount being not bona fide and it was also not borne out in any contentions raised before lo wer authorities, additions so made after adjusting expenditure were justified 8. PCIT Vs Avinash Kumar Setia [2017] 81 taxmann.com 476 (Delhi) (Copy Enclosed) where Hon'ble Delhi High Court held that Where assessee surrendered ce rtain inco me by way of declaration and withdraw same after two years without any satisfactory explanation, it could no t be treated as bona fide and, hence, additio n would sustain.
In the above case, it is humbly submitted that the following decisions may kindly be considered with regard to presumption of entrie s found recorded in books of account seized during search as pe r sections 132(4A) & 292C of I.T. Act:
1. CIT Vs Sonal Construction [2012-TIQL-851-HC-
DEL-IT] (Delhi) (Copy enclosed) where Hon'ble Delhi High Court held as follows:
"the Tribunal has also held that the presumption about the genuineness and truth o f the contents of the documents seized, as provided in Section 132(4A), was not available to the AO in the assessment proceedings. The judgment of the Supreme Court in the case of P. R. Met rani, no doubt held that the presumptio n was not available to the AO while completing the assessment and that it was limited to the prior proceedings in connection with the search. However, there was a later statutory ame ndment; Section 292C was intro duced by the Finance Act, 2007 with retrospective effect from 1.10.1975;36 ITA Nos. 5727 & 5728/Del/2014
Sir Shadilal Enterprises Ltd.
++ the phrase "in any proceeding under this Act" in sub-section (1) to section 292C are important. They permit the AO to invoke the presumption that the seized documents belonged to the person searched, that the contents of the seized documents/boo ks of accounts are true and that the signature of eve ry other part o f the books of accounts or documents which purports to be in the handwriting of any particular perso n are in that person's handwriting etc., eve n in the assessment proceedings. After the insertion of the section, the judgment of the Supreme Court cited above can no longe r be called in aid to hold that the presumption is not available to the AO in makinq the assessment; the Tribunal has reasoned that the seized papers are loose pape rs and not books of accounts. We are unable to appreciate the significance or sequitur of the statement made by the Tribunal. It is not necessary that the seized documents should be in the form of proper books of accounts so that they can be relied upon for the purpose of making additions. They could be In any fo rm, including loose pape rs on which notings or scribblings have been made. While commenting on the seize d do cuments, the Tribunal contradicted itself by first observing that i t canno t be stated that the figures in the papers were the actual investment or the actual sale proceeds and thereafte r, in the very next sentence, stating that the seized documents "di d give out certain figures regardi ng the four projects that the assessee had undertaken in the course of his business. " If the seized papers did in fact contain figures relating to the four projects which were admittedly unde rtaken by the assessee, we do not see how the Tribunal could hold that the Revenue could no t rely o n the correlation be tween the po sition shown by the seized documents and what has been recorded by the assessee in its books of account. The Tribunal does not dispute that there existed a correlation; but it yet held that the correlation alone was not sufficient to make the impugned additions. This observation was sought to be supported by some reasons;
++ an examination of those reasons sho ws that they are far from convincing. The Tribunal held on the basis 37 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
of the judgment of the Supreme Court in the case of P. R. Metrani that the presumption about the truth and genuineness of the contents of the seized documents and its handwriting was not available to the AO in the course of the assessment pro ceedings. This position has no w been nullified by the retrospe ctive ame ndment. Eve n otherwise, there is no merit in the conclusion of the Tribunal that the correlation between the seized material and the books of account, on which reliance was placed by the AO, was not sufficient for the purpose of making the additions;"
2. CIT Vs Nare sh Kumar Aqqarwala [2019] taxmann.com 2 49 (Delhi)/[2011] 198 Taxman 194 (Delhi)/[2011] 331 ITR 510 (Delhi) (Copy Enclosed) where Hon'ble Delhi High Court held that there was a presumption raised under se ction 132(4A) on seizure of fax message and it was upon assessee to rebut that presumption by offering a plausible explanatio n.
3. Mahabir Prasad Rungta Vs CIT [2014] 43 taxmann.com 328 (Jharkhand)/[2014] 266 CTR 175 (Jharkhand) (Copy Enclosed) where Hon'ble Jharkhand High Court held that loose sheets seized during search sometimes contain valuable information and thus those are to be regarded as ' docume nts' within meaning of section 158B(b). There is presumption raised under section 132(4A) regarding documents seized and in light of such presumption, assessee ought to have produced other documents to disprove entries made in loose sheets.
4. Bhagheeratha Engineering Ltd Vs ACIT [2017] 79 taxmann.com 325 (Kerala)/[2015] 379 ITR 244 (Kerala)/[2016] 282 CTR 209 (Kerala) (Copy Enclosed) where Hon'ble Kerala High Court held that in view of introduction of section 158BH presumption under section 132(4A) regarding o wnership of seized assets was not limited to proceedings for search and seizure unde r sectio n 132, and was also available for framing regular assessment.
38 ITA Nos. 5727 & 5728/Del/2014Sir Shadilal Enterprises Ltd.
5. Ashok Kumar Vs CIT f20161 69 taxmann.com 129 (Patna)/[2016] 239 Taxman 436 (Patna)/[2016] 386 ITR 342 (Patna)/[2016] 290 CTR 450 (Patna) (Copy Enclosed) where Hon'ble Patna High Court held that where Assessing Officer passed inco me escaping assessment on basis of a loose sheet found in premises of father of assessee, action of Assessing Officer was justified being based on relevant material and, merely, because he used wrong presumption in assessment order it would not change nature o f order.
6. Baldev Raj Vs CIT [2010] 2 taxmann.co m 335 (Punjab & Haryana) (Copy Enclosed) Assessee submitted that presumption under section 132(4A) of the Act was rebuttable and the assessee led evidence to rebut the said presumption. There is no dispute about the proposition that presumption can be rebutted nor the Tribunal has held to the contrary. The Tribunal has held that the assessee failed to rebut the presumption, which is purely a fi nding of fact. Ho n'ble Punjab & Haryana High Co urt held that no substantial question of law arises from the impugned order."
18. The ld. DR further submitted as under:
"The ITAT Orde r dated 14.12.20 18 has no t considered the facts correctly.
In para 193 of ITAT order it is stated as follows:
"193. Both the Id. AR and Id. DR have supplied the copy of Warrant of Autho rization which is part of record. A perusal of Warrant of Authorization u/s 132 of the Act shows the name s of the following persons:
1. Shri R.K. Miglani
2. Shri Lalit Khaitan
3. M/s Radico Khaitan Ltd
4. UPDA 39 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
194. Address on which this Warrant of Authorization was to be executed is P/25, 1st Floor, So uth Extension, Part - 2, New Delhi. Indeed, the name of the assessee is very much there in the Warrant of Authorization but the name of the pre mises is where Shri R.K. Miglani resided. This means that no Warrant of Authorization u/s 132 of the Act was executed at the premises of the assessee on 14.02.2006."
Contradictory finding in para 198 & 199:
"198. At this stage, it is pertinent to mention that on 14.02.2006, when both operations took place, statement of Shri R.K. Miglani was recorded u/s 132(4) of the Act at the pre mises and u/s 133A of the Act at the pre mises of the assessee. This also makes it clear that Shri R. K. Miglani was searche d and UPDA was surve yed. Otherwise, there was no need for examining Shri R.K. Miglani under two different sections i.e. 132(4) and 133A of the Act.
199. If the se arch warrant was never executed at the premises of the assessee, it leads to only one conclusion that the assessee was never searched. If the assessee was never searched u/s 132 of the Act, assessments framed u/s 153A of the Act are bad in law because provisions of section 153A provides for assessment in case of search or requisition."
Hon'ble ITAT is the highest fact finding authority. Stating that there was name of the assessee in search warrant at P/25, 1st Floor, South Extension, Part - 2, New Delhi and then holding proceedings u/s 153A are invalid o n the ground that no Warrant of Authorization u/s 132 of the Act was executed at the premises of the assessee is absurd. It was held that proceedings u/s 153A are bad in law since there was no search at premises o f the assessee which is a perverse finding considering the fact that the Bench admits that name of the assessee was there in the search warrant at residence of Sh. R.K.Miglani Since the Department had information that books of the assessee were kept at residence of Shri R.K. Miglani, name of the assessee was entered in the search warrant. In fact clai m o f the Department is that since the search warrant at the 40 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
residence of Sh. R.K.Miglani contained name of M/s UP Distillers Association (UPDA), proceedings u/s 153A were rightly initiated in the case of UPDA and Annexures A-1 to A-10 seized from residence of Sh. R.K.Miglani constitute incriminating material during the course of search in the case of UPDA and presumption u/s 132(4A) will apply to the assessee. Even this argument of the assessee with regard to presumption u/s 132(4A) has been conveniently ignored in the ITAT order.
In para 208 of ITAT order it is stated as follows:
"208. The Assessing Officer has mentioned that what was take n out from the computer at UPDA premises were only copies of papers impounded from the residence of Shri R.K. Miglani. What was found from the residence of Shri R.K. Miglani cannot be construed as do cuments belonging to the assessee to trigger the provisions of section 153 of the Act unless in the case of Shri R.K. Miglani his Assessing Officer is satisfied that these documents do not belong to Shri R.K. Miglani but belong to UPDA. However, having made these observations, we would like to make it clear that the impugned assessments are not a product of se ction 153C but section 153A of the Act."
It is a factually incorrect finding. The papers seized from residence of Sh R.K.Miglani (Annexure A-1 to A-
10) were to tally different from papers impounded from office of UPDA (Annexure A-1 to A-9).
It is observed that writte n reply as well as arguments of CIT DR have not been considered, which are summarized below:
1. In the written submissions, a chart containing impo rtant seize d pape rs and what was written on them, was submitted. The entire assessment has been made on the basis of notings on these seized papers.
Hon'ble ITAT has decided the case without considering or even me ntioning the seized documents relied upon by the AO as well as CIT(DR). It was not a case where few incriminating papers were seized but a case where 41 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
hundreds of lose papers containing no tings of payments outside books o f account were seized.
2. As per para 27 of the ITAT o rde r, seized papers relied upon CIT (DR) were to be made Annexure to the ITAT o rde r. However, copy of the ITAT order received does not contain these Annexures.
3. The CIT(DR) heavily relied upon the fact that based upon seized documents and statement of Sh R.K.Miglani, registration of the assessee was cancelled and the cancellation was upheld by Hon' ble Delhi High Court as well as Supreme Court.
It is surprising that Hon'ble ITAT in its para 72 has held that failure to allow cro ss examination was denial of principle of natural justice whereas Hon'ble Supreme Court in the case of asse ssee itself has held the statement to be valid and based upon it cancelled registration u/s 12AA
4. The CIT(DR) heavily relied upon the fact that presumptions u/s 132(4A) was available since the documents were seize d from premises of the assessee. ITAT has not considered this argument. Moreover, it has held the proceedings u/s 153A themselves to be invalid.
5. Hon'ble ITAT had not considered detailed written arguments give n by CIT DR with regard to cross examination of Mr R K Miglani.
6. Hon'ble ITAT had not considered decisions of Hon'ble Delhi High Court & Supreme Court in the case of UPDA which have upheld validity of statements of Sh. R K Miglani.
IN T HE SUPREME COURT OF INDIA M/s U P DIST ILLERS ASSOCIATION Vs COMMISSIONER OF INCOME TAX CENTRAL-III Adarsh Kumar Goel & Rohinton Fali Nariman, JJ Dated: April 13, 2018 42 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
Income Tax - SLP - Sections 12AA & 132(4) THE assessee , a trust, was registered under the Act. During the relevant AY, search ope rations were conducted at the premises of one an individual, who was the General Secretary of the assessee. His statements were recorded u/s 132(4). Later such statements were re tracted, although the le tter of retraction was filed afte r a co nsiderable pe riod of time. Meanwhile, based on the material and documents seized, the CIT invoked the provisions of Section 12AA(3) to cancel the re gistration of the assessee. Such order was later upheld by the Tribunal. Subsequently, the High Court too held that registration granted to a trust can be cancelled u/s 12AA(3), relying upo n the statement of person concerned recorded u/s 132 (4). Hence the assessee's appeal.
On hearing the matter, the Apex Court was of the view that, Whe the r the registration of a trust can be cancelled u/s 12AA(3) based on statements of a perso n related to such trust u/s 132(4) - YES: SC There are no grounds to interfere with the orde r. Pending applications, if any, set aside as well.
Assessee's SLP Dismissed JUDGEMENT Heard learned counsel for the petitioner.
Delay condoned.
We do not find any ground to interfere with the impugned order. The spe cial leave petitio n is, accordingly, dismissed."
19. Heard the arguments of bo th the parties and perused the material available on reco rd.
43 ITA Nos. 5727 & 5728/Del/2014Sir Shadilal Enterprises Ltd.
20. We have gone thro ugh the orders of the Co-o rdinate Bench of Tribunal in the case of Mo han Meakin Ltd. in ITA NO. 3787/Del/2008, order date d 01.08.2017 and also the o rders of the Co-o rdinate Bench in the case of Lords Distillery Ltd. in ITA NO. 2576/Del/2010 and the case of the assessee dated 14.12.2018 wherein specific findings on the status of these document has been given at para 45 to 56 of the orders. Regarding the cross examination, the issue has been dealt at para 64 to 70 of the order. Fo r the sake of ready reference , the relevant case of the order is reproduced as under:
"45. We do not find any force in the contentions of the ld. DR. Firstly, the cancellation of registration u/s 12AA of the Act in the case of UPDA is altogether a different issue. The Assessing Officer cancelled the registration on the strength of the statement of Shri R.K. Miglani and search which took place at his residence. The Tribunal upheld the order of the Assessing Officer which was affirmed by the Hon'ble High Court of Delhi. But this was in the context of provisions of section 12AA of the Act, and, therefore, cannot be stretched to the proceedings u/s 153C of the Act in respect of 11 distilleries. A judgment has to be considered in the context in which it was delivered.
46. The Assessing Officer, during the course of assessment proceedings, has heavily relied upon the entries found in the impounded documents. But, there is not even a single finding by the Assessing Officer which could suggest that the corresponding entries were found in the regular books of account of any of the distillery. This shows that no independent verification/examination was done by the Assessing Officer who simply relied upon the seized material supplied to him by the Investigation Wing.
47. The Revenue has strongly contended that the seized documents are such documents which belong to the captioned assessees. In our understanding of the facts and on perusal of the seized documents, this assertion of the Revenue is completely and wholly misplaced in law. The concept of the term "belong to" has judicially been examined as discussed elsewhere, where it has been held that before a document can be held to be belonging to other persons, it must be established that he has the right of ownership on such document. Courts have held that there is a distinction between the expression "belong to" of a document and "pertaining to" or "relating to" a 44 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
document. In our understanding, the term "belongs to" is not synonymous to the expression "pertaining to" or "relating to".
48. This has prompted the Legislature to bring amendment to section 153C of the Act vide Finance Bill, 2015 wherein in clause (b) to section 153C, "belong to" has been replaced by "relates to". But the Legislature, in its wisdom, has given effect to this amendment w.e.f 01.06.2015. Therefore, the same cannot be applied to the assessment years under consideration.
49. Moreover, the Hon'ble Supreme Court in the case of Chuharmal Vs. CIT 172 ITR 250 has held that possession is proof of ownership and the seized documents were found from the possession of Shri R.K. Miglani.
50. As mentioned elsewhere, none of the documents referred to by the Assessing Officer belong to the captioned assessees nor it has been identified that which documents belong to which captioned assessees. In our considered opinion, the Assessing Officer has exceeded in his jurisdiction to initiate the proceedings u/s 153C of the Act.
51. The ld. DR has heavily relied upon the judgment of the Hon'ble Delhi High Court in the case of Super Malls Pvt Ltd 393 ITR 557. In our considered view, this judgment has no application at all on the facts of the cases in hand. In this judgment, the Hon'ble High Court has only examined whether a satisfaction note prepared in the case of the person other than the person searched by the same Assessing Officer in the file of the person searched could be held as valid. If the judgment is read as a whole, the Hon'ble High Court has not held that the term "belong to" is inter-changeable with "relating to" or "pertaining to".
52. As mentioned elsewhere, the Revenue has not brought anything on record to establish that the production figures reflected in the tables were forwarded by the appellants through a fax message or on its letter head. This was clear mandate of the Hon'ble High Court when it remitted the matter to the file of the Tribunal.
53. The ld. DR emphasized that the document 114 of Annexure A-1 bears the signature of two employees but we have to say that during the course of assessment proceedings, these employees were never questioned by the Assessing Officer to verify whether they actually put the signatures on those documents. In our considered opinion, such documents are only hearsay evidence.
54. Another theory propounded by the Revenue is that every distillery had to contribute Rs. 20/- per case and had thus contributed such a sum is entirely unsupported by any material. It is not known 45 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
who had collected the alleged sum to have been contributed and what is the destination of such sum. In none of the documents, name of the payee, any public servant or politician appears. This itself establishes that the documents are dumb.
55. Before us, the ld. DR has supplied the copies of the documents which form Annexure of the seized documents, but has failed to demonstrate the basis on which such documents belonged to the distilleries or any of the distilleries. The emphasis was on the names appearing in such loose sheets without there being any corroborative material. Therefore, these documents do not stand the test of judicial scrutiny to conclude that such documents belong to distilleries or any of the distilleries.
56. Ironically, none of the persons whose names have been referred to in the various impounded sheets as members of the core committee or any other person have been examined by the Assessing Officer during the course of assessment proceedings. There is no independent evidence that the captioned assessees have contributed any sum except notings in the seized documents, which have been conclusively held hereinabove do not belong to the captioned assessees."
..............
...............
64. The contention of the ld. DR that since Shri R.K. Miglani was related to the member distilleries of UPDA, therefore it was not necessary to allow cross examination is not acceptable. The Hon'ble High Court of Delhi in the case of Shri S.N. Aggarwal 293 ITR 43 has held as under:
"11. In the present case the Assessing Officer has placed reliance on the statement of Smt.Sarla Aggarwal, daughter of the assessed while arriving at the conclusion, that the entries belong to the transactions of the assessed. This statement made by Smt.Sarla Gupta, cannot be said to be relevant or admissible evidence against the assessed, since the assessed was not given any opportunity to cross-examine her and even from the statement, no conclusion can be drawn that the entries made on the relevant page belongs to the assessed and represents his undisclosed income. It is also an admitted fact that the statement of the assessed was not recorded at any stage during the assessment proceedings. The only conclusion which can be drawn about the nature and contents of the document is that it is a dumb document and on the basis of the entry of nothings or figure etc. in this document, it cannot be concluded that this represents the undisclosed income of the assessee."46 ITA Nos. 5727 & 5728/Del/2014
Sir Shadilal Enterprises Ltd.
65. The Hon'ble Supreme Court in the case of Andaman Timber Vs. CIT in Civil Appeal No. 4228 OF 2006 has held as under:
"According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity in as much as it amounted to violation of principles of natural justice because of which the assessee was adversely affected."
66. The ld. DR has strongly emphasized on the evidentiary value of the statement recorded u/s 132(4) of the Act and has relied upon several judicial decisions to support his contentions. The ld. DR further relied upon the provisions of section 132(4A) of the Act and 292C of the Act. These sections read as under:
"Section 132(4) in The Income- Tax Act, 1995 (4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is fond to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income- tax Act, 1922 (11 of 1922 ), or under this Act. 1 Explanation.- For the removal of doubts, it is hereby declared that the examination of any person under this sub- section may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Indian Income- tax Act, 1922 (11 of 1922 ), or under this Act.] Section 132(4A) in The Income- Tax Act, 1995 (4A) 2 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;
(ii) that the contents of such books of account and other documents are true; and 47 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
(iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person' s handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.] Section 292C [l)] Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession ol of any person in the course of a search under section 132 20[or survey section 133A], it may, in any proceeding under this Act, be presumed--
1 i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;
ii) that the contents of such books of account and other documents are true; and
iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.
Where any books of account, other documents or assets have been d to the requisitioning officer in accordance with the provisions of 132A, then, the provisions of sub-section (1) shall apply as if such books of account, other documents or assets which had been taken into custody from on referred to in clause (a) or clause (b) or clause (c), as the case may be, of sub-section (1) of section 132A had been found in the possession or control of that person in the course of a search u/s 132."
67. A plain reading of the aforementioned sections would show that the presumption is available in the case of a person who was found in the possession or control i.e. the 'searched person'. Therefore, the presumption may be good against Shri R.K. Miglani 48 ITA Nos. 5727 & 5728/Del/2014 Sir Shadilal Enterprises Ltd.
or UPDA. But not in the cases of "the other person" which are the distilleries in the present appeals. Therefore, the judicial decisions relied upon by the ld. DR are misplaced and, therefore, needs no specific mention.
68. At this stage, it would not be out of place to point out that the premises of Shri R.K. Miglani were searched, which means that Shri R.K. Miglani was the 'searched person' and all the presumptions were available against him in respect of the seized documents/notings in the seized documents and other things.
69. Surprisingly, the assessments of Shri R.K. Miglani have been made on the returned income which will be clear from the following table:
_____________________________________________________ __Assessment Returned income Assessed income u/s Year _______________Rs.
_______________Rs_____________________ 2000-01
177080 177080 153A
2001-02 194615 194615 -do-
2002-03 191652 191652 -do-
2003-04 343219 343219 -do-
2004-05 225541 225541 -do-
2005-06 231867 231867 -do-
70. It can be seen from the above chart that the case in which the presumption was available, the Revenue accepted what was returned by Shri R.K. Miglani and on the strength of his statement that the documents seized from his premises belong to distilleries, the additions have been made as unexplained expenditure/contribution to UPDA."
21. Having gone through the orders in de tail in the absence of any other ne w mate rial, and in the absence of any material change in the facts and circumstances of the case, we hereby hold that the addition made by the Assessing Officer based on the entries in the books found, belonging to and seized at the premises of the third party, in the absence o f cross examination of such party based on which the addition has bee n made cannot be held to be sustainable in the eye s of the law.49 ITA Nos. 5727 & 5728/Del/2014
Sir Shadilal Enterprises Ltd.
22. In the result, both the appeals of the assessee are allowed.
Order Pronounced in the Open Court on 16 /12/2019 Sd/- Sd/-
(Amit Shukla) (Dr. B. R. R. Kumar)
Judicial Member Accountant Member
Dated: 16/12/2019
*Subodh*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR