Income Tax Appellate Tribunal - Delhi
M/S. S3H Builders Pvt. Ltd., New Delhi vs Acit, New Delhi on 1 January, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES "B": DELHI
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
AND
SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
ITA.No.448/Del./2016
Assessment Year 2009-2010
The ACIT, Central Circle-17, M/s. S3H Builders Pvt. Ltd.,
Room No.101, Hall No.1, J-1/160, Rajouri Garden,
1st Floor, ARA Centre, vs., New Delhi.
E-2, Jhandewalan.New Delhi. PAN AAMCS3772Q
(Appellant) (Respondent)
C.O.No.183/Del./2016
Arising out of
ITA.No.448/Del./2016
Assessment Year 2009-2010
M/s. S3H Builders Pvt. Ltd., The ACIT, Central Circle-17,
J-1/160, Rajouri Garden, Room No.101, Hall No.1,
New Delhi. vs., 1st Floor, ARA Centre,
PAN AAMCS3772Q E-2, Jhandewalan.New Delhi.
(Cross Objector) (Respondent)
For Revenue : Ms. Rachna Singh, CIT-D.R.
Shri Sajjan Kumar Tulsiyan,
For Cross-Objector : Advocate
Ms. Nisha Rachh, C.A.,
Shri Karan Kumar, C.A.
Date of Hearing : 07.12.2017
Date of Pronouncement : 01.01.2018
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ITA.No.448/Del./2016 & CO.No.183/Del./2016
M/s. S3B Builders Pvt. Ltd., New Delhi.
ORDER
PER BHAVNESH SAINI, J.M.
The Departmental Appeal as well as Cross Objection of the assessee are directed against the order of the Ld. CIT(A)-27, New Delhi, dated 09.11.2015, for the A.Y. 2009-2010.
2. Briefly, the facts of the case are that search and seizure and survey operations under section 132/133A of the I.T. Act were conducted on 12th April, 2012 in the case of the assessee along with other cases of Aryan Sainik Group at various residential and business premises. The A.O. issued notice dated 06.02.2015 under section 153C r.w.s.153A to the assessee and in response thereto, assessee filed return of income declaring loss of Rs.58,423. The A.O. at the assessment stage disallowed expenditure of Rs.55,923. The A.O. also found that assessee had received share application money amounting to Rs.1,25,00,000 from Kolkata based companies. The A.O. after giving opportunity of being heard to the assessee, made the addition of Rs.1.25 crores on account of unexplained share application money and treated the same as unexplained cash credit under section 68 of the I.T. Act, 1961. The A.O. passed the 3 ITA.No.448/Del./2016 & CO.No.183/Del./2016 M/s. S3B Builders Pvt. Ltd., New Delhi.
assessment order dated 30th March, 2015 under section 143(3) r.w.s.153A/153C of the I.T. Act, 1961.
3. The assessee challenged the addition before Ld. CIT(A). The submissions of the assessee are reproduced in the appellate order. The Ld. CIT(A) found that assessee has proved the identity, creditworthiness and genuineness of the share applicants by submitting their name, address, PAN, bank statements and balance confirmations and ITR/acknowledgments. It was, therefore, noted that assessee proved the conditions of Section 68 of the I.T. Act. The addition of Rs.1.25 crores was deleted and appeal of assessee allowed.
4. The Revenue, in its appeal, challenged the deletion of addition of Rs.1.25 crores under section 68 of the I.T. Act. The assessee in the cross objection supported the order of the Ld. CIT(A) in deleting the addition as well as raised the issue that since no incriminating material was found during the course of search and no material was recovered during the course of search and original assessment had been completed, therefore, no addition is warranted as per the decision of the Hon'ble Delhi High Court in the case of CIT 4 ITA.No.448/Del./2016 & CO.No.183/Del./2016 M/s. S3B Builders Pvt. Ltd., New Delhi.
vs. Kabul Chawla 61 taxmann.com 412. The assessee filed cross objection and also raised an additional ground which reads as under:
"That the impugned proceedings u/s. 153C of the Act initiated by the A.O. being devoid of any incriminating material in terms of the recent decision of the Hon'ble Apex Court dated 29.08.2017 in the case of CIT vs. Sinhgad Technical Education Society, (2017) Tax Pub (DT) 3941 84 taxmann.com 290 (SC), is bad in law."
5. Learned Counsel for the Assessee submitted that search was conducted in Aryan Sainik Group of cases and assessee- company was not subjected to search. The A.O. made addition on account of unexplained cash credit, under section 68 of the I.T. Act , which are recorded in the books of account of the assessee-company. He submitted that since no incriminating material/documents were found during the course of search against the assessee-company and it is not proved that any incriminating material belong to the assessee-company, therefore, conditions of Section 153C are not satisfied in this case. He has submitted that additional ground is legal in nature and can be decided on the basis of the material already brought on record, therefore, the same may be admitted for 5 ITA.No.448/Del./2016 & CO.No.183/Del./2016 M/s. S3B Builders Pvt. Ltd., New Delhi.
hearing and disposal of the appeal. He has relied upon the decision of the Hon'ble Supreme Court in the case of CIT vs. Sinhgad Technical Education Society 84 taxman.com 290.
6. On the other hand, the Ld. D.R. relied upon the orders of the authorities below and objected to the admission of the additional ground at this stage. The Ld. D.R. submitted that in group cases, during the course of search material was found to initiate proceedings under section 153C of the I.T. Act against the assessee company. Therefore, A.O. correctly initiated the proceedings under section 153C of the I.T. Act. The Ld. D.R. submitted that assessee failed to prove identity, creditworthiness and genuineness of the transaction. Therefore, addition was correctly made by the A.O.
7. The Learned Counsel for the Assessee in the rejoinder relied upon the submissions made before the Ld. CIT(A) and submitted that assessee produced sufficient documents before A.O. to prove ingredients of Section 68 of the I.T. Act. Therefore, addition was correctly deleted by the Ld. CIT(A).
8. We have considered the rival submissions. The Revenue Department made a case under section 153C of the I.T. Act against 6 ITA.No.448/Del./2016 & CO.No.183/Del./2016 M/s. S3B Builders Pvt. Ltd., New Delhi.
the assessee on the basis of the search conducted in Aryan Sainik Group of cases. According to Section 153C of the I.T. Act, the A.O. should be satisfied that any money, bullion, jewellery or other articles or things or books of account or documents seized or requisitioned belongs or belong to the person other than the person referred to in Section 153A, then the books of account or documents or assets seized are requisitioned, shall be handed-over to the A.O. having jurisdiction over other person and that A.O. shall proceed against each such other person and issue such other person notice and assess or re-assess the income of such other person in accordance with the provisions of Section 153A of the I.T. Act. 8.1. It is clear from the language of Section 153C of the I.T. Act that before issuing notice under section 153C of the I.T. Act, the primary condition that has to be fulfilled is that the money, bullion, documents etc., seized should belong to such other person. If this condition is not satisfied, no proceedings could be taken under section 153C of the I.T. Act.
8.2. In the present case, it is an admitted fact that since no search was conducted in the case of the assessee-company and the 7 ITA.No.448/Del./2016 & CO.No.183/Del./2016 M/s. S3B Builders Pvt. Ltd., New Delhi.
A.O. proceeded to make assessment under section 153C of the I.T. Act against the assessee-company and made the addition on the basis of the entries contained in the books of account of the assessee- company considered at assessment stage, it would have to be seen whether Revenue has brought on record any material to prove that any incriminating material found during the course of search belongs to the assessee-company or that whether A.O. is able to satisfy the conditions of Section 153C of the I.T. Act, in the present case. The additional ground is legal in nature and all the relevant facts and material are available in the orders of the authorities below and on record. The additional ground being legal in nature and goes to the route of the matter, therefore, it should be admitted for the purpose of disposal of the appeal. In support of our view, we rely upon the decision of the Hon'ble Supreme Court in the case of National Thermal Power Company reported in 229 ITR 383 and also another decision of the Hon'ble Supreme Court in the case of CIT vs. Sinhgad Technical Education Society (2017) 397 ITR 344 (SC) in which the Hon'ble Supreme Court held as under :
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ITA.No.448/Del./2016 & CO.No.183/Del./2016 M/s. S3B Builders Pvt. Ltd., New Delhi.
"Held, dismissing the appeals, (i) that the Tribunal permitted the assessee to raise the additional ground on the ground that it was a jurisdictional issue taken up on the basis of facts already on record, that under section 153C of the Act, incriminating material which was seized had to pertain to the assessment years in question, and that the documents which were seized did not establish any co- relation, document-wise, with these four assessment years. The Tribunal found that the material disclosed in the satisfaction note belonged to assessment year 2004-05 or thereafter. The Tribunal rightly permitted this additional ground to be raised and correctly dealt with the ground on the merits as well. The High Court was right in affirming this view of the Tribunal.
Decision of the Bombay High Court in CIT v. Sinhgad Technical Education Society [2015] 378 ITR 84 (Bom) affirmed.
(ii) That the assessment order passed by the Assessing Officer covered eight assessment years. For six assessment 9 ITA.No.448/Del./2016 & CO.No.183/Del./2016 M/s. S3B Builders Pvt. Ltd., New Delhi.
years the assessment was under section 153C of the Act. The assessment order was set aside only in respect of four of those assessment years and on a technical ground. The objection pertaining to the four assessment years in question did not relate to the other tax assessment years, namely, 2004-05 and 2005-06. Nor did this decision have a bearing in respect of assessment for assessment year 1999-2000 or assessment year 2006-07. The necessary consequence would be that the conclusions of the Assessing Officer in his assessment order regarding the activities of the trust not being genuine and not carried out in accordance with the trust deed or cancellation of registration, denial of benefits of sections 11 and 12 would not be affected by this judgment."
8.3. Considering the facts of the case in the light of above decisions, it is clear that additional ground being legal in nature and all material facts are available on record and it being the jurisdictional issue, we admit the additional ground for the purpose of hearing and disposal of appeal.
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ITA.No.448/Del./2016 & CO.No.183/Del./2016 M/s. S3B Builders Pvt. Ltd., New Delhi.
9. The Hon'ble Gujrat High Court in the case of Vijaybhai N. Chandrani vs. ACIT (2011) 333 ITR 436 (Guj.) held as under :
"Sections 153A, 153B and 153C of the Income-tax Act, 1961, lay down a scheme for assessment in case of search and requisition. Section 153C which is similarly worded to section 158BD 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 153A 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 between the two provisions inasmuch as under section 153C 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 was satisfied that any undisclosed income belongs 11 ITA.No.448/Del./2016 & CO.No.183/Del./2016 M/s. S3B Builders Pvt. Ltd., New Delhi.
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 132A, he could proceed against such other person under section 158BC. Thus a condition precedent for issuing notice under section 153C 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 requirement is not satisfied, recourse cannot be had to the provisions of section 153C. Held, allowing the petition, that admittedly, the three loose papers recovered during the search proceedings did not belong to the petitioner. It was not the case of the Revenue that the three documents were in the handwriting of the petitioner. In the circumstances, when the condition precedent for issuance of notice was not fulfilled action taken under section 153C of the Act stood vitiated." 12
ITA.No.448/Del./2016 & CO.No.183/Del./2016 M/s. S3B Builders Pvt. Ltd., New Delhi.
10. The Hon'ble Bombay High Court in the case of CIT vs. Lavanya Land Pvt. Ltd., (2017) 397 ITR 246 (Bom.) held as under :
"It is clear that before issuing notice under section 153C of the Income-tax Act, 1961, the primary condition that has to be fulfilled is that the money, bullion, documents, etc., seized should belong to such other person. If this condition is not satisfied, no proceedings could be taken under section 153C.
The JC group was a partner in the Mumbai Special Economic Zone and Navi Mumbai Special Economic Zone projects of India. This group had floated various companies to purchase large chunks of land in the vicinity of the special economic zones. The group's real estate operations were being handled by V, G and D. D was also the managing land transactions outside the Mumbai Special Economic Zone. The assessee was one of the companies floated by this group to purchase land outside the Mumbai Special Economic Zone. During search of D's residence, certain incriminating documents were seized and his statement 13 ITA.No.448/Del./2016 & CO.No.183/Del./2016 M/s. S3B Builders Pvt. Ltd., New Delhi.
was recorded. A show cause notice was issued to the assessee informing it that Rs. 38.45 crores, which was a sum reflected from the documents seized from D's residence and Rs. 4 crores in addition, which was evidenced by loose documents in the form of cash receipts, were found during search and seizure proceedings. The assessee was called upon to explain and show cause why these amounts should not be treated as unexplained expenditure under section 69C of the Act, since the assessee did not provide any explanation with regard to the documents seized under section 132 of the Act for the assessment years from 2003 to 2009 and 2009-10. The assessment order was passed and the additions were made. The unexplained expenditure was apportioned to all the land companies floated by the JC- group. The Tribunal held that an entry in the hooks of account maintained in the regular course of business is relevant for the purpose of considering the nature and impact of a transaction, but notings on slips of paper or loose sheets of paper were required to be supported or 14 ITA.No.448/Del./2016 & CO.No.183/Del./2016 M/s. S3B Builders Pvt. Ltd., New Delhi.
corroborated by other evidence. There was a distinction between loose papers found from the possession of the assessee and similar documents found from a third person. The documents were not found from the possession of the assessee but from the possession of a third person i.e., D. Mere mention of the names of the villages where the companies might have purchased lands would not give any basis to assume, presume or surmise that the names of the companies were mentioned in the documents. The Tribunal set aside the order of the Commissioner (Appeals) pertaining to the assessment year 2008-09 holding that the action under section 153C of the Act was bad in law. On appeal :
Held, dismissing the appeal, that the finding that section 153C was not attracted and its invocation was bad in law was not based just on interpretation of section 153C but after holding that the ingredients thereof were not satisfied in the present case. That was an exercise carried out by the Tribunal as the last fact finding authority. 15
ITA.No.448/Del./2016 & CO.No.183/Del./2016 M/s. S3B Builders Pvt. Ltd., New Delhi.
Therefore, the finding was a mixed one. There was no substantial question of law arising from such an order which alternatively considered the merits of the case as well. The deletion of the addition was justified."
11. The Hon'ble Madras High Court in the case of CIT vs. Late J. Chandrasekar (HUF) (2011) 338 ITR 61 (Mad.) held as under :
"On the search conducted in the case of A and group on November 25, 2003, material pertaining to "on-money" payment paid to the assessee in respect of property purchased from the assessee were seized. Based on that, the Assessing Officer issued notice under section 153C of the Income-tax Act, 1961, and reworked the capital gains. The Commissioner (Appeals) and the Tribunal held that the notice under section 153C was not valid. On appeal to the High Court :
Held, dismissing the appeals, that the Assessing Officer did not have the benefit of the seized material while issuing the notice under section 153C. In the light of the fact that the Revenue did not produce any material to show that the materials were available at the hands of the Assessing Officer at the time of 16 ITA.No.448/Del./2016 & CO.No.183/Del./2016 M/s. S3B Builders Pvt. Ltd., New Delhi.
issuing notice, the Tribunal rightly came to the conclusion that he assumption of jurisdiction under section 153C was not valid."
12.. The ITAT, Agra Bench in the case of ACIT, Circle-I, Gwalior vs. Global Estate (2013) 142 ITD 740 (Agra) held as under :
• The assessee had a case for quashing of proceedings under section 153C. No material is produced to prove that the Assessing Officer in the case of person searched was satisfied that any money, bullion, jewellery or other valuable article or things or books of account or documents seized or requisitioned belongs to or belong to a person other than the person referred to in section 153A. • No material is produced before to show if any satisfaction was recorded by the Assessing Officer in that case that the material belongs to any person other than the person with respect to whom search was made under section 132. Department did not produce any material to show if any such satisfaction as required under section 153C was recorded by the Assessing Officer in the case of person 17 ITA.No.448/Del./2016 & CO.No.183/Del./2016 M/s. S3B Builders Pvt. Ltd., New Delhi.
searched. No material is produced in reference to above requirement.
• No material is also produced before to show that books of account or documents or assets seized had been handed over to the Assessing Officer having jurisdiction over such other person. In the absence of any adequate material produced by the department contention of the assessee was justified that in this case, the Assessing Officer had not recorded any satisfaction that any seized document or material belongs to any person other person searched. • Since the revenue is in appeal, therefore, burden was upon them to prove that necessary ingredients of section 153C have been complied with in this case before invoking jurisdiction under section 153C.
• It is added further here that the Assessing Officer has not referred to any seized document or material in the assessment orders on the basis of which, additions on merit have been made. Therefore, the conditions of section 153C as noted above are also not satisfied in this case. Therefore, 18 ITA.No.448/Del./2016 & CO.No.183/Del./2016 M/s. S3B Builders Pvt. Ltd., New Delhi.
there is no infirmity in the order of the Commissioner (Appeals) in quashing the proceedings under section 153C."
13. In the present case, is an admitted fact that no recovery has been made from the possession of the assessee-company. The department's belief is that some material found during the course of search in Aryan Sainik Group of cases. The A.O. on examining the books of account of the assessee-company found that assessee has received share application money of Rs.1.25 crores in assessment year under appeal which were already disclosed to the Revenue Department prior to the date of search. Therefore, its books of account could not be treated as incriminating material against the assessee-company. No evidence was found during the course of search that any money (cash credit) belongs to the assessee- company. No evidence was found during the course of search or otherwise to prove that assessee-company has received any accommodation entry. The A.O. has not referred to any seized document or material in the assessment order on the basis of which, addition on merit have been made. Therefore, the conditions of Section 153C are not satisfied in this case. Therefore, there were no 19 ITA.No.448/Del./2016 & CO.No.183/Del./2016 M/s. S3B Builders Pvt. Ltd., New Delhi.
justification for the A.O. to make addition of Rs.1.25 crores against the assessee in proceeding under section 153C of the I.T. Act, 1961. We, accordingly, set aside the orders of the authorities below and quash the proceedings under section 153C of the I.T. Act. Since, we quash the proceedings under section 153C of the Act, therefore, there is no need to decide the addition on merit, which have already deleted by the Ld. CIT(A).
14. In the result, cross objection of the Assessee is allowed and Departmental appeal is dismissed.
Order pronounced in the open Court.
Sd/- Sd/-
(PRASHANT MAHARISHI) (BHAVNESH SAINI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Delhi, Dated 1st January, 2018
VBP/-
Copy to
1. The appellant
2. The respondent
3. CIT(A) concerned
4. CIT concerned
5. D.R. ITAT "B" Bench
6. Guard File
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ITA.No.448/Del./2016 & CO.No.183/Del./2016 M/s. S3B Builders Pvt. Ltd., New Delhi.
//By Order// ASST. REGISTRAR : ITAT :
DELHI BENCHES : DELHI.