Income Tax Appellate Tribunal - Delhi
Anshika Consultants Pvt. Ltd., New ... vs Assessee on 24 September, 2015
1
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "A" NEW DELHI
BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER
AND
SHRI I.C. SUDHIR : JUDICIAL MEMBER
ITA no. 3729/Del/2010
Asstt. Yrs: 2000-01
DCIT, Central Circle-18, Vs. M/s Anshika consultants Pvt. Ltd.,
New Delhi. 110, 1st Floor, Bhanot Corner,
Pamposh Enclave, G.K.-I,
PAN: SSSVS 2083 J
C.O. No. 314/Del/2010
( In ITA no. 3729/Del/2010 )
Asstt. Yrs: 2000-01
M/s Anshika consultants Pvt. Ltd., Vs DCIT, Central Circle-18,
Pamposh Enclave, G.K.-I, New Delhi. New Delhi.
( Appellant ) (Respondent)
Department by : Shri Ravi Jain CIT DR
Assessee by : Shri Suresh Anantharaman Adv.
Date of hearing : 28/07/2015.
Date of order : 24/09/2015.
ORDER
PER S.V. MEHROTRA, A.M..:
The captioned appeal by the revenue and the cross-objection by the assessee, are directed against the order dated 3-5-2010 passed by the ld. CIT(A)-III, New Delhi in appeal no. 261/07-08, relating to AY 2000-01.
2. In its appeal the revenue has raised following grounds of appeal: 2
"1. On the facts and in the circumstances ofthe case, the CIT(A) has erred in law and on facts in annulling the assessment made u/s 153C?
2. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts by holding that the seized documents, on the basis of which proceedings u/s 153C were initiated, do not belong to the assessee?
3. On the facts and in the circumstances of the case, the CIT(A) has erred in interpreting Section 153A1153C of the IT Act?
4. The order of the CIT(A) is erroneous and not tenable in law and on facts.
5. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal."
3. In its cross-objections the assessee has taken following grounds:
"1. It is contended that the provisions of Section 153A of the Income-tax Act, 1961 (the Act) are not applicable at all and the assessment order passed is] s 153CI 143(3) of the Act is without jurisdiction.
2. It is contended that neither any search was initiated against the assessee u/s 132(1) of the-Act, nor any books of accounts, other documents or any other assets were requisitioned u] s 132A of the Act and hence the assessment made u/s 153C/ 153A of the Act is invalid.
3. The order dated 20.12.2007 passed u/s 153C read with Section 143(3) of the Act is without jurisdiction.
4. It is contended that the additions made in the order u/s 153C/ 153A of the Act are not qua search material and need to be deleted.3
5. That no corresponding seized material was found in the course of search for subject additions and the relevant Income Tax Return for the said Assessment Year was filed prior to the search in normal course suo moto disclosing the particulars of subject additions, which stood accepted u/s 143(1) of the Act.
6. That the returns having been accepted u/s 143(1) of the Act, no assessment as such could be said to be pending on the date of initiation of search and have abated in the light of contextual and harmonious reading of second proviso of Section 153A( 1) of the Act.
7. That the assessment as contemplated uls 153A of the Act is not a de-novo assessment and additions made therein have to be necessarily restricted to undisclosed income unearthed during the search.
8. That as per Hon'ble Supreme Court ruling in the case of Manish Maheshwari, 289ITR 341 (sq, present provision of Section 153A leading to six years assessment, being drastic in consequence needs to be interpreted most strictly and whenever possible to the favour of the assessee.
9. That since longest arm of revenue, being search stands exercised in present case, assessment u/s 153CI 153A of the Act needs to be made on the basis of hidden assets/unaccounted money, incriminating material, unearthed during the search.
10) That the power of review being not available to same authority, under act in normal circumstances, must/ should not be allowed in present provisions of Section 153C, otherwise it would allow roving and fishing enquiries in search based assessment, which is not the legislative intent.
11) That the aforesaid legal position stands accepted in the following orders of ITAT in context of Section 153C/ 153A of the assessment:4
(i) Anil Kumar Bhatia vs. ACIT, Central Circle 17, New Delhi in ITA Nos. 2660 to 2665/DEL/2009.
(ii) Jodhpur Bench of ITAT ruling in Suncity Alloys Pvt. Ltd. vs. ACIT, (2009) 124 TTJ 674.
(iii) Kolkata Bench of IT AT ruling in LMJ International, 119 TT J 214.
12) That the Commissioner of Income Tax (Appeals) has erred in not deciding the issues (Grounds of Appeal) raised by the appellant on the merits of the case.
13) It is contended that the sum of Rs.67 ,30,272/ - received on account of Commission and Brokerage Services is taxable under Chapter IV-D (income from business or profession) of the Act and not under Chapter IV-F (income from other sources) of the Act."
4. Brief facts of the case are that search and seizure operation in M/s Flex Group of cases was conducted on 23-2-2006. During the course of search, certain documents/ books of account, belonging to the assessee company were seized from the premises of Sh. Manvinder Singh (Party A-10) and M/s Flex Industries Ltd. (now M/s Uflex Ltd. Party B-2), in whose names/ cases warrants of authorization had been issued. These documents were seized vide Annexures A-9 of party A-10 and A-3 of Party B2. These documents, seized from various premises, were as under:
Party Nos. Premises Annexure Page Nos.
A-10 Residence of Sh. Manvinder Singh A-9 12 and 23
B-2 Office of Flex Industries Ltd. A-3 35 to 66
5
5. Consequently, the AO issued notice u/s 153C, in response to which assessee filed return of income, declaring nil income. However, the assessee had paid taxes on book profit of Rs. 71,33,231/- u/s 115JA .
6. The assessee was engaged in the business of investment in shares and securities, sale/purchase of shares and securities. The AO has observed that from the perusal of P&L A/c of the assessee for the year under consideration, it was observed that the assessee had received Rs. 19,93,025/- on account of commission from M/s Akshay Trading Corporation and Rs. 47,37,247/- on account of brokerage from M/s Enam Securities Pvt. Ltd. and had treated these amounts as business income. The AO, however, after giving reasons in the assessment order, treated the same as "income from other sources" and completed the assessment. Thus, no addition had been made on the basis of documents, which were found at the residential premises of Sh. Manvinder Singh and M/s Flex Industries Ltd., as noted earlier.
7. Before ld. CIT(A), the assessee had challenged the validity of the assessment made by the AO u/s 153A read with sec. 153C of the Act, vide additional ground on the ground that the proceedings in respect of such other person, other than the person in whose case the search u/s 132 of the Act had been conducted, could only 6 be initiated if any books of account/ documents or other assets belonging to such other person were seized during the search.
8. Ld. CIT(A) admitted the additional ground raised by the assessee in view of the decision of Hon'ble Supreme Court in the case of NTPC 229 ITR 383, inter alia, observing that this was purely legal in nature.
9. Ld. CIT(A) examined the fact, whether any books of a/c/ documents, belonging to the assessee were seized from the premises of Sh. Manvinder Singh and M/s Flex Industries Ltd. He has reproduced the satisfaction note recorded by the AO, which reads as under:
"Search & Seizure operation in M/s Flex Group of cases was conducted on 23.2.2006. During the course of this search, certain documents/ books of accounts belonging to the assessee company were seized from the premises of Sh. Manvinder Singh( Party A-10) and M/s Flex Industries Ltd (now M/s. Uflex Ltd. Party B-2) in whose names/cases warrants of authorisation had been issued. These documents were seized vide Annexures A-9 of Party A-10, A-3 of Party B-2. The documents seized from various premises are listed as under:
Party Nos. Premises Annexure Page Nos. A-10 Residence of Sh. Manvinder Singh A-9 12 and 23 B-2 Office of Flex Industries Ltd. A-3 35 to 66
In the light of the above, I am satisfied that the above case is fit for assessment U/s 53C in accordance with the provisions of section 153A of the 1. T Act as the seized documents listed above belong to M/s Anshika Consultants Pvt. Ltd. being a person other than the person where the search has been initiated. Hence, in order to assess/ reassess the income of the 7 given assessee notice u/s 153C is hereby issued for assessment year 2000-01 to 2005-06."
10. He pointed out that perusal of the satisfaction recorded before issuing the notice u/s 153C of the Act makes it clear that the documents claimed as belonging to the assessee had not been discussed in the assessment order.
11. Ld. counsel referred to the decision of the ITAT Bangalore Bench in the case of P. Shrinivas Naik Vs. ACIT (2008) 306 ITR (AT) 411 (Bang.), wherein the term 'belonging to' had been examined. It was, inter alia, held that term 'belonging' implied something more than the idea of casual association. It involves the notion of continuity and indicates one more or less intimate connection with the person over a period of time. He also relied on the decision of Ahmedabad Bench in the case of Meghmani Organics Ltd. (ITA 2938 to 2942/AHD/2008), inter alia, holding as under:
"In order to avoid multiplicity of proceedings and have only single assessment and in respect of pending assessments, Section 153 A to Section I53C of the Act were proposed to be introduced. If that be the intention, in assessments u/s I53C the issue can be considered only if the pending assessment is abated and not otherwise. If the original assessments are completed which are subject matter of further litigation and if those very assessments are re-agitated u/s 153C proceedings the same will not only multiply assessment proceedings but will multiply even the appellate proceedings. This can never be the intention of the Legislature.)"8
12. He also referred to the decision of Kolkata Bench of the Tribunal in the case of LMJ International Ltd., wherein it was, inter alia, held that if in course of search nothing incriminating was found, then the concluded assessment should not be reopened. He also referred to the decision of ITAT Bangalore Bench in the case of P. Shrinivas Naik Vs. ACIT (supra), wherein it was held that if any document found, though pertaining to the assessee, if not belonging to such assessee, the action u/s 153C read with section 153A cannot be invoked. Ld. CIT(A) has also referred to the decision of Hon'ble Gujarat High Court in the case of Vijay Bhai N Chandrani Vs. ACIT (Spl. Civil application no. 13787 of 2009 dated 30-3-2010), wherein it has been, inter alia, observed as under:
12. On a plain reading of the aioresaid provisions it is apparent that sections. 1 53A, I53B and I53C lay down a scheme for assessment in case of search and requisition. Section I53A deals with procedure for issuance of notice and assessment or reassessment in case of the person where a search is initiated under section 132 or books of account, other documents or assets are requisitioned under section I32A after the 31st day of May, 2003. Section I53B lays down the time limit for completion of assessment under section- I53A. Section I53C which is similarly worded to section 158 JJD of the Act provides that where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in Section I53-A he shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person. However; there is a distinction 9 between the two provisions in as much as under section I53C notice can be issued only where the ~ money, bullion, jewellery or other valuable article or thing or books of account or documents. seized or requisitioned belong to such other person, whereas under Section 158BD if the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or assets were requisitioned under section I32A, he shall proceed against such other person under section I58BC.
13. Thus a condition precedent/or issuing notice under section I53C and assessing or reassessing income of such other person, is that the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned should belong to such person. If the said requirement is not 'Satisfied', resort cannot be had to the provisions of section I53C of the Act.
14. Examining the facts of the present case in the fight of the aforesaid statutory scheme, it is an admitted position as emerging from the record of the case, that the documents in question, namely, the three loose papers recovered during the search proceedings do not belong to the petitioner. It may be that there is a reference to the petitioner inasmuch as his name is reflected in the list under the heading Samutkarsh Members Details and certain details are given under different columns against the name of the petitioner along with A other members, however, it is nobody's case that the said documents belong to the petitioner. It is not even the case of Revenue that the said three documents are in the handwriting of the petitioner. In the circumstances, when the condition precedent for issuance of notice is not fulfilled any action taken under section I53C of the Act stands vitiated."10
13. Ld. CIT(A), after examining the facts of the case allowed the assessee's appeal for the following reasons:
a. The Assessing officer, having jurisdiction over the cases of Shri Malviner Singh and M/s Flex Industries Ltd. recorded the satisfaction that the documents seized belonged to the assessee, without discussing the contents of the documents.
b. No addition had been made by the AO to the income of the assessee on the basis of these documents.
c. The AO initiated proceedings on the basis of these documents, without being satisfied that these documents belonged to the assessee and contained the details of the income, which was not disclosed to the department by such other person.
d. Documents seized during the searched could not be termed to be indicating any limited interest of the ownership of the assessee in such documents, because no addition had been made by the AO on the basis of these documents.
14. Ld. CIT(A), accordingly, held that documents seized did not belong to the assessee and the AO was not justified in initiating proceedings u/s 153C read with section 153A of the Act and as such the proceedings initiated u/s 153C of the Act were not as per the law.
15. Ld. DR submitted that papers belonging to assessee were found during the course of search at the premises of Sh. Manvinder Singh and M/s Flex Industries Ltd. and, therefore, CIT(A) was not justified in annulling the assessment.
16. Ld. DR submitted that the incriminating material u/s 153A in the context of 153C will be material found course of search belonging to assessee and, therefore, completed assessment will abate. 11
17. At the outset ld. counsel referred to pages 148-149 of the PB which are documents on the basis of which notice u/s 153C was issued. He pointed out that these are the ledger accounts of Anshika Consultants Pvt. Ltd. (assessee) in the books of AR Airways (P) Ltd. He further pointed out that these ledger accounts are for FY 2004-05 and not for the relevant assessment year 2000-01.
18. Ld. counsel referred to the submissions made before ld. CIT(A), contained at pages 107 to 131 of the PB and pointed out that on page 118 of the PB, it was clearly pointed out that seized papers pertained to FY 2004-05 (wrongly mentioned as FY 2005-06) and had nothing to do with the assessment year under consideration. Apart from this, both these transactions with M/s AR Airways (P) Ltd. belonging to Shri Manvinder Singh were duly reflected in the books of a/c of M/s Anbishika Consultants Pvt. Ltd.
19. Ld. counsel further referred to page 44 of the case laws paper book, wherein the decision in the case of DCIT Central Circle Vs. Devi Dayal Petro Chemicals Pvt. Ltd. (ITA nos. 5430 to 5436/Del/2013) is contained and pointed out that in para 9.2 of the order it has been observed as under:
"9.2. Considering the facts of the case and the arguments of both the sides, we set aside the matter to the file of the Assessing Officer for re-examination of the issue in the light of the above decision of Hon'ble Jurisdictional High Court i.e., the Assessing Officer will first verify the years to which the seized documents belonged. There would be no justification for continuation of the proceedings under Section 153C to which the seized documents do not belong. Therefore, the Assessing Officer will drop the proceedings initiated under Section 153 of the years to which the seized documents do not belong. For the year to which the seized documents belonged, he will verify whether the transaction reflected by the seized documents are 12 duly accounted for in the books of account. If the transactions are duly accounted for in the books of account, as contended by the learned counsel, the Assessing Officer will drop the proceedings initiated under section 153C. However, if for the year to which the seized documents belonged, the transaction reflected by the seized documents is not recorded in the books of account, the proceedings under Section 153C will continue and the Assessing Officer will make the assessment afresh in accordance with law. Since we have set aside all the .years under appeal, the Revenue's appeals on merits do not require any adjudication and they are also deemed to be allowed for statistical purposes. The Assessing Officer will proceed to make the assessment afresh only in the year where proceedings under Section 153C can validly continue in the light of the above decision of Hon'ble Jurisdictional High Court."
20. He, therefore, submitted that the matter may be restored to the file of AO to find out to which year the documents belonged.
21. We have considered the submissions of both the parties and have perused the record of the case. Ld CIT(A) has annulled the assessment on the ground that the documents did not belong to assessee. In the present case, documents at pages 148-149 are the ledger accounts in the books of AR Airways (P) Ltd. Therefore, proceedings u/s 153C could be initiated as the documents belonged to assessee. Therefore, ld. CIT(A) was not justified in annulling the assessment. However, if the documents did not pertain to the year under consideration, then no 153C assessment could be made.
22. In view of above, the matter is restored back to the file of AO to find out as to which year the documents belong.
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23. In the result, revenue's appeal is allowed for statistical purposes and since the matter has been restored back to the file of AO, the cross- objections filed by the assessee have become infructuous and stands dismissed accordingly.
Order pronounced in open court on 24/09/2015.
Sd/- Sd/-
(I.C. SUDHIR ) (S.V. MEHROTRA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: ______/09/2015.
*MP*
Copy of order to:
1. Assessee
2. AO
3. CIT
4. CIT(A)
5. DR, ITAT, New Delhi.
14
-+ Date Initial
1. Draft dictated on -09.2015 PS
2. Draft placed before author .09.2015 PS
3. Draft proposed & placed before the second JM/AM
member
4. Draft discussed/approved by Second Member. JM/AM
5. Approved Draft comes to the Sr.PS/PS PS/PS
6. Kept for pronouncement on PS
7. File sent to the Bench Clerk PS
8. Date on which file goes to the AR
9. Date on which file goes to the Head Clerk.
10. Date of dispatch of Order.