Income Tax Appellate Tribunal - Delhi
Global Realty Creations Ltd., New Delhi vs Dcit, New Delhi on 7 April, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "C", NEW DELHI
BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER
AND
SHRI O.P. KANT, ACCOUNTANT MEMBER
I.T.A. No.1245/DEL/2014
A.Y. : 2005-2006
M/S GLOBAL REALTY VS. DCIT, CENTRAL CIRCLE-12,
CREATIONS LTD., ARA CENTRE, JHANDEWALAN
(FORMERLY KNOWN AS EXTN.,
M/SHIGHLAND DEVELOPERS NEW DELHI
PVT. LTD.),
12, RING ROAD, LAJPAT
NAGAR-IV,
NEW DELHI -110024
(PAN:AAACH1604E)
(APPELLANT) (RESPONDENT)
AND
I.T.A. Nos.1335-1336/DEL/2014
A.YRS. : 2003-04 & 2004-05
M/S GLOBAL HERITAGE VS. DCIT, CENTRAL CIRCLE-12,
VENTURE LTD., ARA CENTRE, JHANDEWALAN
(FORMERLY KNOWN AS M/S EXTN.,
KRISHNA BUILDWELL & NEW DELHI
DEVELOPERS PVT. LTD. ),
12, RING ROAD, LAJPAT
NAGAR-IV,
NEW DELHI -110024
(PAN:AACCK9842M)
(APPELLANT) (RESPONDENT)
AND
I.T.A. No.1341/DEL/2014
A.Y. : 2004-2005
M/S GLOBAL TELEVENTURE VS. DCIT, CENTRAL CIRCLE-12,
LTD., ARA CENTRE, JHANDEWALAN
(FORMERLY KNOWN AS M/S EXTN.,
SINGH FINCAP LTD.), NEW DELHI
12, RING ROAD, LAJPAT
NAGAR-IV,
NEW DELHI -110024
(PAN:AAHCS1443D)
(APPELLANT) (RESPONDENT)
1
Assessee by : Sh. Sudesh Garg, Adv.
Department by : Sh. A.K.Saroha, CIT(DR)
ORDER
PER H.S. SIDHU : JM These 04 Appeals are filed by the separate Assessees emanating from the different Orders of the Ld. CIT(A)-XXXI, New Delhi relevant to assessment years 2003-04, 2004-05 & 2005-06. Since the issues involved in these appeals are common and identical, hence, these appeals were heard together and are being disposed by this common order for the sake of convenience, by dealing with Assessee's Appeal No. 1245/Del/2014 (AY 2005-06) in the case of Global Realty Creations Ltd. vs. DCIT.
2. The grounds raised in ITA No. 1245/Del/2014(AY 2005-06) read as under:-
1. That the impugned order is bad in law, in nature as assessment has not been framed on the seized pursuant to an action taken under section 132 of the Act but the reassessment and change of opinion has been made as such the order passed is illegal and therefore, is liable to be quashed.
2. The Ld. CIT(A) erred in law and facts by confirmed the addition of Rs. 3,13,00,000/- as unexplained cash credit u/s.68 of the I.T. Act, 1961.2
3. The Ld. CIT(A) erred in not considering the additional evidence filed.
4. The assessee craves leave for addition, notification, deletion, any of grounds of appeal either before the hearing of appeal or at the time of appeal.
3. The grounds raised in ITANo. 1335/Del/2014(AY 2003-04) read as under:-
1. That the impugned order is bad in law, in nature as assessment has not been framed on the seized pursuant to an action taken under section 132 of the Act but the reassessment and change of opinion has been made as such the order passed is illegal and therefore, is liable to be quashed.
2. The Ld. CIT(A) erred in law and facts by confirmed the addition of Rs. 1,10,00,000/- as unexplained cash credit u/s.68 of the I.T. Act, 1961.
3. The Ld. CIT(A) erred in not considering the additional evidence filed.
4. The assessee craves leave for addition, notification, deletion, any of grounds of appeal either before the hearing of appeal or at the time of appeal.3
4. The grounds raised in ITANo. 1336/Del/2014(AY 2004-05) read as under:-
1. That the impugned order is bad in law, in nature as assessment has not been framed on the seized pursuant to an action taken under section 132 of the Act but the reassessment and change of opinion has been made as such the order passed is illegal and therefore, is liable to be quashed.
2. The Ld. CIT(A) erred in law and facts by confirmed the addition of Rs. 50,00,000/- as unexplained cash credit u/s.68 of the I.T. Act, 1961.
3. The Ld. CIT(A) erred in not considering the additional evidence filed.
4. The assessee craves leave for addition, notification, deletion, any of grounds of appeal either before the hearing of appeal or at the time of appeal.
5. The grounds raised in ITA No. 1341/Del/2014(AY 2004-05) read as under:-
1. That the impugned order is bad in law, in nature as assessment has not been framed on the seized pursuant to an action taken under section 132 of the Act but the reassessment and change of opinion has been made as 4 such the order passed is illegal and therefore, is liable to be quashed.
2. The Ld. CIT(A) erred in law and facts by confirmed the addition of Rs. 1,85,75,000/- as unexplained cash credit u/s.68 of the I.T. Act, 1961.
3. The Ld. CIT(A) erred in law and facts by confirmed the disallowing expenses of Rs. 70,156/- under the provisions of section 14A of the I.T. Act, 1961.
4. The Ld. CIT(A) erred in not considering the additional evidence filed.
5. The assessee craves leave for addition, notification, deletion, any of grounds of appeal either before the hearing of appeal or at the time of appeal.
6. The assesses have also filed the common legal additional grounds of appeal in all the 04 appeals. For the sake of convenience, we are reproducing the aditional grounds raised in ITA No. 1245/Del/2014 (AY 2005-06) as under:-
1. The Ld. CIT(A) has erred on facts and in law in confirming the assessment of the appellant passed without satisfying the substantive and procedural requirements under section 153C of the Income Tax Act.
5
2. Without prejudice to the other grounds of appeal, the Ld. CIT(A) has erred on facts and in law in confirming the additions which were not based on the incriminating material found and seized during the course of search.
ITA NO. 1245/DEL/2014 (AY 2005-06) [GLOBAL REALTY CREATIONS LTD. VS. DCIT)
7. The brief facts of the case are that a search and seizure operation was carried out u/s. 132 of the Income Tax Act, 1961 in Rajdarbar Group of cases on 31.07.2008. During search operation certain document were seized which belong to the assessee company. The case of the assessee company was transferred to CC-5, New Delhi u/s. 127 of the I.T. Act, 1961 by the orders of Ld. CIT(Central)-I, Delhi. Notice u/s. 153C of the Income Tax Act, 1961 dated 23.7.2010 was issued to the assessee company but the same returned as unserved. Again notice u/s. 153C was issued at the new address of the assessee company on 2.8.2010, requiring it to file the return for the assessment year 2005-06. Return of income for the assessment year 2005-06 was filed by the assessee on 13.8.2010 declaring NIL income. The return filed by the assessee company is the same as that of filed under section 139 of the Act on 22.3.2006. Notice u/s. 143(2) was issued to the assessee on 9.9.2010 fixing the case for hearing and further notice u/s. 142(1) of the Act alongwith a questionnaire were issued to the assessee on 22.9.2010 requiring it to file necessary details. In the event of non-cooperation and keeping in view the limitation in the matter, notice u/s. 144 of the Act dated 19.11.2010 was issued, giving the assessee last opportunity to 6 furnish the required details for the completion of assessment. In response thereto, the Assessee's AR attended the proceedings and filed the details from time to time. The assessee company is engaged in the business of lending money, securities and property and to discount, buy and sell and deals in bills, notes, warrant coupons and other negotiable or transferrable securities and documents. However, during the year under consideration, no business activity was carried out by the assessee company. Vide Question no. 24 of the questionnaire dated 16.9.2010 the assessee was specifically asked to furnish the complete details of fresh share application money received during the year and it was requested to prove the genuineness of those transactions within the meaning of section 68 of the I.T. Act, 1961 by filing confirmations, copies of IT returns/ PAN, Bank accounts etc. AO observed that on perusal of ledger account of share application money filed by the assessee reveals that assessee company received fresh share application money of Rs. 1,10,00,000/- from 7 different concerns. Accordingly, show cause notice dated 7.12.2010 was issued requiring it to prove the identity and creditworthiness of the parties as well as the genuineness of those transactions and in response to the same assesse filed only share application forms and apart from this nothing has been filed by the assessee in order to prove the genuineness of the transactions as well as identity and creditworthiness of the parties from which amounts have been claimed received. Thereafter, the AO completed the assessment at Rs. 1,10,00,000/- on account of unexplained cash credit u/s. 68 of the 7 I.T. Act, 1961 vide his Order dated 27.12.2010 passed u/s. 153C r.w.s. Section 143(3) of the I.T. Act, 1961.
8. Against the aforesaid assessment order dated 27.12.2010, assessee preferred an appeal before the Ld. CIT(A), who vide impugned Order dated 30.1.2014 has dismissed the appeal of the asseseee.
9. Aggrieved with the order of the Ld. CIT(A), the Assessee is in appeal before the Tribunal.
10. Ld. Counsel of the assessee on the admission of additional ground has stated that the additional grounds are on the assumption of jurisdiction u/s.153C of the I.T. Act besides the scope of assessment u/s.153/153A of the Income Tax Act. It was further submitted that it is settled law that the additional grounds of appeal which are legal in nature or which raises question of law or which involve interpretation of circular /notification etc. can be taken up first time at any level of adjudication. Even those additional grounds which are based on fresh evidences are also normally admitted if the additional evidences are found admissible in accordance with Rule 29 of the ITAT Rules. Ld. Counsel of the assessee during the course of hearing, specifically relied on two judgements of this Tribunal. The first one was in the case of one of the assessee in this set of appeal i.e. Global Heritage Venture Ltd. In this matter for the AY 2009-10 (ITA Number 3197/Del/2013) which was decided on 21/06/2016 similar question of law was raised by way of additional/revised ground and the Hon'ble Tribunal not only admitted the additional grounds but also ruled 8 in favor of the assessee on the same. He further relied upon the another judgment of the Tribunal dated 22/12/2016 in the case of another group company namely Narendra Inpex Ltd where similar legal ground was sought to be adjudicated by the assessee by way of application under Rule 27 of the ITAT Rules 1963. It was argued that admission of a ground under Rule 27 is absolutely discretionary and looking at the identical facts and circumstances of the matter the Hon'ble Tribunal not only admitted the legal ground under Rule 27 but also decided in favor of the assessee. 10.1 Ld. AR further argued that the AO has to tax the income of the assessee as per provisions of law. It was submitted that Tribunal in the umpteen numbers of cases almost without exceptions have admitted the question of law raised so as to deliver substantive justice to the appellants. Reliance was placed on CBDT's Circular No. 14(XL-35) dated 11-4-1955. In the said circular, the CBDT observed as under:-
"3. Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the Officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the Department for it would inspire confidence in him that he may be sure of getting a square deal from the Department. Although, therefore, the responsibility for claiming refunds and reliefs rests with assessee on whom it is imposed by law, officers should :-
(a) Draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other;
9
(b) Freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs."
6. The intention of this circular is not that tax due should not be charged or that any favour should be shown to anybody in the matter of assessment, or that where investigations are called for, they should not be made. Whatever the legitimate tax it must be assessed and must be collected. The purpose of this circular is merely to emphasise that we should not take advantage of an assessee's ignorance to collect more tax out of him than is legitimately due from him."
10.2 It was argued that the above circular has been judicially noted and approved in many judgments and has been relied upon in support of the assessees' claim.
10.3 The Ld AR further relied upon several case laws to argue his case in favor of admission of additional grounds and requested that keeping in view of the following decisions, the additional grounds raised by the assessee may be admitted and decided first.
National Thermal Power Co.Ltd. Vs. C.I.T., 229 ITR 383 (SC) Jute Corporation of India Ltd. v. CIT (1991) 187 ITR 688 Sayaji Mills Ltd. (1974) 94 ITR 26 (Guj.) Steel Ingots (P.) Ltd. Vs. C.I.T., 86 Taxman 440 (MP) C.I.T. Vs. Bhopal Sugar Industries Ltd., 233 ITR 429 (MP) Ramlal V/s. Rewa Coalfields Ltd. AIR 162 S.C.361 Navnitlal C. Zaveri V/s. K K Sent, ACIT Bombay 56 ITR 198 (S.C) Chokshi Metal Refinery V/s. CIT 107 ITR 63 (Guj) CIT v. Jai Parbolic Springs Ltd. (2008) 306 ITR 42 (Del.) CIT v. Natraj Stationery Products (P) Ltd., (2009) 312 ITR 222 10 CIT v. Rose Services Apartment India P. Ltd., [2010] 326 ITR 100 (Delhi) CIT v. Jindal Saw Pipes Ltd., [2010] 328 ITR 338 (Delhi) CIT v. Pruthvi Brokers & Shareholders Pvt. Ltd. - 349 ITR 336 (Bom.) Chicago Pneumatic India Ltd. v. DCIT (2007) 15 SOT 252 (Mumbai). 10.4 Ld. Counsel of the assessee has also filed the Written Submissions with regard to his contention on the incorrect assumption of jurisdiction u/s. 153C of the I.T. Act, 1961 and on additional legal grounds, which reads as under:-
"INCORRECT ASSUMPTION OF JURISDICTION UNDER SECTION 153C OF THE INCOME TAX ACT, 1961.
Ld. AO has provided copy of the satisfaction note before issuing notice under Section 153C of the Act. Copy of the satisfaction note is enclosed herewith for reference and records at Pg number of Paper Book-01. The satisfaction note reads as below:-
"Satisfaction note for proceedings u/s 153C of the Income Tax Act, 1961 A search operation was conducted on Rajdarbar Group of cases on 31.07.2008. During the course of search operation at the premises of i. Party A-7 Global Reality Ventures Pvt. Ltd. Various papers were found and seized belonging to M/s Global Reality Creations Ltd. The annexure are marked as under: Party A-7 Annexure A-45, Hard Disc containing Books of Accounts of M/s Global Reality Creations Ltd.
Thus the proceedings u/s 153C r.w.s. 153A of the Income Tax Act, 1961 are being initiated in the above case. 11 The perusal of the satisfaction note clearly indicates that the action under Section 153C of the Act was not based on the correct legal foundations. The following may kindly be noted:- i. Ld. AO doesn't really indicate how and whether the vaguely indicated documents in the satisfaction note were found to be belonging to the assessee within the meaning of section 153C of the Act.
ii. No mention of these documents in the assessment order ultimately passed under section 153C further lead to the conclusion that these documents had no relevance or belongingness to the assessee.
iii. Ld. AO doesn't even vaguely record the satisfaction under section 153C, except the words satisfaction in the heading satisfaction note for proceedings under section 153C, at no other place word satisfaction has been used. In the concluding line, Ld. AO merely mentions that "Thus the proceedings u/s 153C r.w.s. 153A of the Income Tax Act, 1961 are being initiated in the above case"
iv. There is no recording/ reference about the contents of these documents allegedly pertaining to the appellant. Even in the assessment order, no such mention has been made. This indicates how irrelevant these documents were to the assessment of the appellant.
v. No satisfaction note has been recorded by the assessing officer(s) of the entity/entities from whose premises the documents etc. were seized regarding the satisfaction of that assessing officer(s) that he/they found the documents belonged to the appellant. It is necessary that the assessing officer of the entity in whose hands the documents/ asset was seized records a satisfaction that the document/ asset belonged to some other entity. This has been repeatedly held 12 to be necessary for invoking jurisdiction u/s 153C by higher judicial authorities including the jurisdictional High Court. Section 153C of the Act for ready reference is reproduced herewith:-
"153C.(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to in sub-section (1) of section 153A Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made except in cases where any assessment or reassessment has abated.
(2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due 13 date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year--
(a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or
(b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or
(c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A"
Very recently Hon'ble Delhi High Court had an occasion to look at the conditions required to be fulfilled before initiating an action under section 153C of the Income Tax Act. Two orders in the case of PepsiCo India Holdings (P.) Ltd v ACIT [2014] 50 taxmann.com 299 (Delhi) & Pepsi Foods Pvt. Ltd v ACIT [W.P. (C) 415/2014 & CM 823/2014]are also filed with the submission at Pg numbers 132 to 139 of Paper Book. In the matter of Pepsi Foods Pvt. Ltd., Hon'ble Delhi High Court has ruled as below:-
"11. It is evident from the above satisfaction note that apart from saying that the documents belonged to the petitioner and that the Assessing Officer is satisfied that it is a fit case for issuance of a notice under Section 153C, there is nothing which would indicate as to how the presumptions which are to be normally raised as indicated above, have been 14 rebutted by the Assessing Officer. Mere use or mention of the word "satisfaction" or the words "I am satisfied" in the order or the note would not meet the requirement of the concept of satisfaction as used in Section 153C of the said Act. The satisfaction note itself must display the reasons or basis for the conclusion that the Assessing Officer of the searched person is satisfied that the seized documents belong to a person other than the searched person. We are afraid, that going through the contents of the satisfaction note, we are unable to discern any "satisfaction" of the kind required under Section 153C of the said Act. (Emphasis Supplied)
12. This being the position the very first step prior to the issuance of a notice under Section153C of the said Act has not been fulfilled. Inasmuch as this condition precedent has not been met, the notices under Section 153C are liable to be quashed. It is ordered accordingly. The writ petitions are allowed as above. There shall be no order as to costs."
In PepsiCo India Holdings (P.) Ltd v ACIT [2014] 50 taxmann.com 299 (Delhi)-Hon'ble Court was pleased to lay down the following proposition of law "13. Having set out the position in law in the decision of this Court in the case of Pepsi Foods Pvt. Ltd. (supra), it must be seen as to whether the Assessing Officer of the searched person (the Jaipuria Group) could be said to have arrived at a satisfaction that the documents mentioned above belonged to the petitioners.
14. First of all we may point out, once again, that it is nobody"s case that the Jaipuria Group had disclaimed 15 these documents as belonging to them. Unless and until it is established that the documents do not belong to the searched person, the provisions of Section 153C of the said Act do not get attracted because the very expression used in Section 153C of the said Act is that "where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A ...." In view of this phrase, it is necessary that before the provisions of Section 153C of the said Act can be invoked, the Assessing Officer of the searched person must be satisfied that the seized material (which includes documents) does not belong to the person referred to in Section 153A (i.e., the searched person). In the Satisfaction Note, which is the subject matter of these writ petitions, there is nothing therein to indicate that the seized documents do not belong to the Jaipuria Group. This is even apart from the fact that, as we have noted above, there is no disclaimer on the part of the Jaipuria Group insofar as these documents are concerned.
15. Secondly, we may also observe that the finding of photocopies in the possession of a searched person does not necessarily mean and imply that they "belong" to the person who holds the originals. Possession of documents and possession of photocopies of documents are two separate things. While the Jaipuria Group may be the owner of the photocopies of the documents it is quite possible that the originals may be owned by some other person. Unless it is established that the documents in question, whether they be photocopies or originals, do not belong to the searched person, the question of invoking Section 153C of the said Act does not arise.
16. Thirdly, we would also like to make it clear that the assessing officers should not confuse the expression "belongs to" with the expressions "relates to" or "refers to". A registered sale deed, for example, "belongs to" the purchaser of the property although it obviously "relates to" or "refers to" the vendor. In this example if the purchasers premises are searched and the registered sale deed is seized, it cannot be said that it "belongs to" the vendor just because his name is mentioned in the document. In the converse case if the vendor"s premises are searched and a copy of the sale deed is seized, it cannot be said that the said copy "belongs to" the purchaser just because it refers to him and he (the 16 purchaser) holds the original sale deed. In this light, it is obvious that none of the three sets of documents - copies of preference shares, unsigned leaves of cheque books and the copy of the supply and loan agreement - can be said to "belong to" the petitioner.
17. In view of the foregoing discussion, we do not find that the ingredients of Section 153C of the said Act have been satisfied in this case. Consequently the notices dated 02.08.2013 issued under Section 153C of the said Act are quashed. Accordingly all proceedings pursuant thereto stand quashed."
* emphasis supplied Subsequent to the aforesaid rulings, Hon'ble Delhi High Court has reaffirmed the aforesaid proposition of law in a number of cases.
There are various other rulings addressing the requirements to be fulfilled before initiating valid action u/s 153C. In these cases, Hon'ble Courts & Tribunals have held that the conditions precedent for invoking process u/s 153C has to be strictly complied with. In three of the matters belonging to the assessee group namely M/s Nageshwar Investment Ltd. and M/s Natural Product Bio-Tech Ltd and M/s Global Heritage Venture Ltd in the identical circumstances Hon'ble Delhi Tribunal quashed the proceedings u/s 17 153C. Copies of these orders are attached in the paper book, as per the details below;
Name of Assessee Page no. of paper
book
M/s Global Heritage Venture 3-17
Ltd
M/s Natural Product Bio-Tech 19-34
Ltd
M/s Nageshwar Investment 38-47
Ltd.
Relevant Para from the ITAT order in the case of M/s Natural Product Bio-Tech Ltd are as below:
"22. In the light of the case laws cited above and on a reading of Section 153A and 153C the exercise that is required to be done by the AO has been spelt out by the Coordinate Bench of this Tribunal in the case of DSL Properties Pvt. Ltd. Vs. DCIT 33 Taxman.com 420 vide para 15 has held that if the Assessing Officer is assessing the person searched as well as other person whose assets, books of account or documents were found at the time of search, then also, first while making the assessment in the case of the person searched, he has to record the satisfaction that the money bullion, jewellery or other valuable article or thing or books of account or documents belonged to the person other than the person searched. Then the copy of this satisfaction note is to be placed in the file of such other person and the relevant document should also be transferred from the file of the person searched to the file of such other person. Thereafter, in the capacity of the Assessing Officer of such other person, he has to issue the notice u/s 153A read with section 153C. The Assessing Officer of the searched person and such other person may be the same but these are two different assessees and therefore the Assessing Officer has to carry out the dual exercise first as the Assessing Officer of the person searched in which he has to record the satisfaction, during the course of assessment order proceedings of the person searched. We concur with the said view of the coordinate Bench and would like to add that this satisfaction must be an 18 objective satisfaction based on an enquiry by the AO to establish that the documents referred to in section 153C which is found during the search u/s. 132, which are seized or requisitioned belongs to a person other than the person searched; and there should be a clear finding to that effect based on which only satisfaction as envisaged u/s. 153C can be inferred. Such a finding by the AO is required for attaining the said satisfaction and then it should be recorded in the file of the assessee which is a 'sine-qua-non' to trigger the jurisdiction for the AO to proceed against such other person. In this case this exercise of recording the satisfaction during the assessment proceedings of the person searched has not been carried out and the satisfaction does not satisfy the requirement of Section 153C and in this case as seen from the satisfaction note itself that it has been done in a mechanical manner, without application of mind. On the same date i.e. 23.7.2010, similar satisfaction note, only with the change in the name of the assessee's has been issued arbitrarily which does not in any manner satisfy the requirement of section 153C of the I.T. Act. We could not find any mention of any valuable articles or things or any books of account or documents have been referred even in the assessment order for framing assessment under section 153C of the I.T. Act. Since for all these years, the returns were originally filed and processed and since no additional material is found pertaining to the assessee which it is held to be belonging to the assessee, the AO does not assume jurisdiction for framing assessment u/s. 153C read with section 153A of the I.T. Act. The AO lacks jurisdiction to initiate proceedings u/s. 153C against the assessee and therefore, the issuance of notice itself is null and void and therefore quashed. Consequently, the impugned assessment order passed u/s. 153C is also a nullity.
23. Since we have quashed the notice u/s 153C of the Act itself, the other grounds are not adjudicated being academic"
Relevant Paras from the order in the case of M/s Nageshwar Investment Ltd. are as below:
"24. In the light of the order of the co-ordinate bench in the case of M/s. V.K.Fiscal Services Pvt. Ltd (supra) and the ratio of the jurisdictional High Court 19 in the case of Pepsico India Holiday (P) Ltd (supra), we hold that the AO lacks jurisdiction to initiate the 153C proceeding against the assessee and therefore the issuance of notice itself is null and void and therefore quashed. Consequently the impugned assessment order u/s 153C is also a nullity.
25. Since we have quashed the initiation and the notice issued by the AO u/s 153Cof the Act itself, the other grounds are not adjudicated being academic."
Hon'ble Delhi High Court has affirmed the quashing of 153C assessments in the group cases mentioned above. All these orders are placed in the Paper book as per the details below;
Name of Assessee Page no. of paper
book
M/s Global Heritage Venture 18
Ltd
M/s Natural Product Bio-Tech 35-37
Ltd
M/s Nageshwar Investment 48-51
Ltd.
Hon'ble High Court held as below in the group entity Nageshwar Investment's case;
" The Income Tax Appellate Tribunal (ITAT) has in the common impugned order dated 28th November 2014 pertaining to Assessment Years ('A Ys') 2005- 06,2006-07,2007-08 & 2008-09 relied upon, inter alia, on the judgment of this court in Pepsico India Holdings (P) Ltd. vs. ACIT [2015] 370 ITR 295 (Delhi). It is stated that the judgment of this court in Pepsico is pending consideration in a special leave petition in the Supreme Court. However no stay has been granted of the operation of the judgment of this court.20
4. Learned Counsel for the Revenue submitted that the ITAT has also relied on the decision of its coordinate Bench in V.K. Fiscal Services Pvt. Ltd. vs. DCIT (ITA Nos. 5460-5465/Del/2012) which in turn relied on an earlier order of the ITAT in DSL Properties Pvt. Ltd. vs. DCIT (ITA No. 11349/Del/2012). He states that the decision of the ITAT in DSL Properties Pvt. Ltd. (supra) is the subject matter of a separate appeal in this court being ITA No. 585/2013 which is pending consideration. He accordingly prays that these appeals be taken up with ITA No. 585/2013.
5. The court is of the view that the essential principle of law that has been settled by this court in Pepsico in regard to the interpretation of the words "belongs to" in section 153C of the Income Tax Act, 1961 would apply on all fours to the facts of the present case irrespective of whether the document recovered (viz., the accounts) is in the form of hard copy or a hard disk.
Consequently, the court does not find any error in the impugned order of the ITAT which gives rise to a substantial question of law."
Hon'ble High Court held as below in the group entity Global Heritage Venture Limited's's case has held;
1. "It is not disputed by learned counsel for the appellant that the matter stands covered against the Revenue by virtue of the judgment of this court in Pepsi India Holdings Pvt. Ltd. vs. ACIT (2014) 50 Taxmann.com 299 (Delhi).
2. Accordingly, the appeal is dismissed."
Hon'ble High Court held as below in the group entity Natural Biotech's case has held;
21
" These three appeals under section 260A of the Income Tax Act, 1961 are directed against the common order dated 28th November 2014 passed by the Income Tax Appellate Tribunal (ITAT) in ITA Nos. 3089, 3088 and 3087/Del/2013 for Assessment Years 2006-07,2007-08 and 2008-09 respectively.
The question that arises in these appeals is whether the hard disc found in the premises of the searched entity i.e. Global Heritage Venture Pvt. Ltd. belonged to the Assessee for the purposes of section 153C of the Act as it stood prior approval to its amendment with effect from 1st June 2015? The ITAT has found, and in this view of this Court Correctly, that the AO failed to record his satisfaction in that regard in terms of the law as explained by the court in Pepsico India Holdings (P) Ltd. vs. ACIT [2015] 371 ITR 295 (Del.) This Court has by this order dated 8th July, 2015 is dismissed the Revenue's Appeal ITA NO. 373/2015 (Pr. Commissioner of Income Tax (Central)-1 vs. Global Heritage Venture Ltd.) and by the order dated 20th July 2015 dismissed the Revenue's appeals ITA No. 406-409/2015 (Pr. Commissioner of Income Tax (Central)-1 vs. Nageshwar Investment Ltd.) all of which involve a similar question."
Recent decision in the case of RRJ Securities is also brought to the kind attention of the Hon'ble Tribunal. In this matter apart from reiterating various propositions of law as laid down in Pepsi, Hon'ble Court has laid down unambiguously that even if the AO of the searched person and the other person in whose case 153C proceedings are carried out are the same they have to record separate satisfaction note. Hon'ble Court has also laid down a very vital proposition that the scope of assessment u/s 153C is restricted to the documents/assets belonging to such other person. Copy of this ruling is also placed in the paper book at Pg number 72-90.
'13. The first and foremost step for initiation of proceedings under Section 153C of the Act is for the AO of the searched 22 person to be satisfied that the assets or documents seized belong to the Assessee (being a person other than the searched person). The AO of the Assessee, on receiving the documents and the assets seized, would have jurisdiction to commence proceedings under Section 153C of the Act. The AO of the searched person is not required to examine whether the assets or documents seized reflect undisclosed income. All that is required for him is to satisfy himself that the assets or documents do not belong to the searched person but to another person. Thereafter, the AO has to transfer the seized assets/documents to the AO having jurisdiction of the Assessee to whom such assets/documents belong. Section 153C(1) of the Act clearly postulates that once the AO of a person, other than the one searched, has received the assets or the documents, he is to issue a notice to assess/re-assess the income of such person - that is, the Assessee other than the person searched - in accordance with provisions of Section 153A of the Act .....
The CIT(A) sought to distinguish the present case by observing that in the facts of the present case, the AO of the searched person who has to handover the documents and the AO of the Assessee was one and the same person. In our view, this distinction is not relevant in the scheme of Section 153C of the Act and the CIT(A) erred in proceeding on the basis that the period of six years was to be reckoned from the end of the financial year preceding the financial year in which the search was conducted ......
18. It, plainly, follows that the recording of a satisfaction that the assets/documents seized belong to a person other than the person searched is necessarily the first step towards initiation of proceedings under Section 153C of the Act. In the case where the AO of the searched person as well as the other person is one and the same, the date on which such satisfaction is recorded would be the date on which the AO assumes possession of the seized assets/documents in his capacity as an AO of the person other than the one searched. ......
23
33. The record slip belongs to the Assessee and, therefore, the action of the AO of the searched persons recording that the same belongs to the Assessee cannot be faulted. However, the question then arises is whether the AO of the Assessee was justified in taking further steps for reassessing the income of the Assessee in respect of the assessment years for which the assessments were concluded and in respect of which the seized document had no bearing. In our view, the same would be clearly impermissible as the seized material now available with the AO, admittedly, had no nexus with those assessments and was wholly irrelevant for the purpose of assessing the income of the Assessee for the years in question. Merely because a valuable article or document belonging to an Assessee is seized from the possession of a person searched under Section 132 of the Act, does not mean that the concluded assessments of the Assessee are necessarily to be re-opened under Section 153C of the Act. In our view, the concluded assessments cannot be interfered with mechanically and solely for the reason that a document belonging to the Assessee, which has no bearing on the assessments of the Assessee for the years preceding the search, was seized from the possession of the searched persons.' In yet another ruling in the case of AkashArogya..Hon'ble High Court has held:
"8. The Revenue has not placed any material to dispute the factual finding of the ITAT that the requirement of the law explained by this Court in Pepsi Foods regarding the recording of satisfaction by the AO even in respect of the searched person was not fulfilled. Consequently, the fact that it was the same AO both for the searched person and the Assessee makes no difference to the consequence of non compliance with the legal requirement regarding the recording of satisfaction. The Court also agrees with the ITAT that even if the AO were the same, satisfaction would have to be recorded separately qua the searched person and the Assessee."24
Copy of this ruling is also placed in the paper book at Pg number 52-60.
Further, it is relevant here to point to the amendments introduced to Section 153C (1) of the Act by Finance (No.2) Act, 2014 w.e.f. 01.10.2014. We may notice the changes brought in to the Section 153C (1). The section before and after the amendment reads as below:
After Amendment Before Amendment "153C.(1) Notwithstanding "153C.(1) Notwithstanding anything contained in section anything contained in section 139, section 147, section 148, 139, section 147, section section 149, section 151 and 148, section 149, section 151 section 153, where the and section 153, where the Assessing Officer is satisfied Assessing Officer is satisfied that any money, bullion, that any money, bullion, jewellery or other valuable jewellery or other valuable article or thing or books of article or thing or books of account or documents seized account or documents seized or requisitioned belongs or or requisitioned belongs or belong to a person other than belong to a person other than the person referred to in the person referred to in section 153A, then the books section 153A, then the books of account or documents or of account or documents or assets seized or requisitioned assets seized or requisitioned shall be handed over to the shall be handed over to the Assessing Officer having Assessing Officer having jurisdiction over such other jurisdiction over such other person and that Assessing person and that Assessing Officer shall proceed against Officer shall proceed against each such other person and each such other person and issue notice and assess or issue such other person reassess the income of the notice and assess or reassess other person in accordance income of such other person with the provisions of section in accordance with the
153A, if, that Assessing Officer provisions of section 153A is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the 25 determination of the total income of such other person for the relevant assessment year or years referred to in sub-section (1) of section 153A From the changes made, it can be seen that the changes brought specifically stresses the requirements of the satisfaction of the assessing officer intending action under section 153C w.r. to the relevance of the document on the determination of total income of the other person then only action under section 153C is required to be taken. This amendment is in consonance with the judicial interpretation of this section made in several cases, some of them referred above.
The appellant further wishes to submit that the controversy has been substantially laid to rest by CBDT Circular number 24/2015 dated 31/12/2015 attached in the Paper Book at page number 02.
The issue of recording of satisfaction for the purposes of section 158BD/153C has been subject matter of litigation.
2. The Hon'ble Supreme Court in the case of M/s Calcutta Knitwears in its detailed judgment in Civil Appeal No. 3958 of 2014 dated 12-3-2014 [2014] 43 taxmann.com 446 (SC) (available in NJRS at 2014-LL-0312-51) has laid down that for the purpose of section 158BD of the Act, recording of a satisfaction note is a prerequisite and the satisfaction note must be prepared by the AO before he transmits the record to the other AO who has jurisdiction over such other person u/s 158BD. The Hon'ble Court held that "the satisfaction note could be prepared at any of the following stages:
(a) at the time of or along with the initiation of proceedings against the searched person under section 158BC of the Act; or
(b) in the course of the assessment proceedings under section 158BC of the Act; or
(c) immediately after the assessment proceedings are completed under section 158BC of the Act of the searched person. "26
3. Several High Courts have held that the provisions of section 153C of the Act are substantially similar/pari-materia to the provisions of section 158BD of the Act and therefore, the above guidelines of the Hon'bleSC, apply to proceedings u/s 153C of the IT Act, for the purposes of assessment of income of other than the searched person. This view has been accepted by CBDT.
4. The guidelines of the Hon'ble Supreme Court as referred to in para 2 above, with regard to recording of satisfaction note, may be brought to the notice of all for strict compliance. It is further clarified that even if the AO of the searched person and the "other person" is one and the same, then also he is required to record his satisfaction as has been held by the Courts.
5. In view of the above, filing of appeals on the issue of recording of satisfaction note should also be decided in the light of the above judgment. Accordingly, the Board hereby directs that pending litigation with regard to recording of satisfaction note under section 158BD/153C should be withdrawn/not pressed if it does not meet the guidelines laid down by the Apex Court.
Considering the aforesaid position of law, its interpretation by the jurisdictional High Court and the jurisdictional Tribunal and the Circular issued by the Board, the manner in which satisfaction note has been recorded and also the contents of the assessment order itself clearly establishes that the exercise of jurisdiction under section 153C by the Ld. AO was incorrect and for this reason alone the assessments u/s 153C need to be set aside/quahed as the same violates the following propositions of law held in the various judgments referred in the earlier parts of this submission.
1. It is necessary that the satisfaction is recorded by the assessing officer of the entity in whose case the document/ asset has been seized to the effect that the relevant document/ asset belong to the other person in whose case action under section 153C is contemplated.
2. It is essential to establish that the document belongs to the person in whose case action u/s 153C is contemplated. 27
3. The assessing officer of the entity before initiating process under section 153C has to record a separate satisfaction that the document/ asset belong to the person in whose case action under section 153C is required to be initiated and also he has to record satisfaction that the document/ asset have significance on the assessment of income of the person in whose case action u/s 153C is required to be initiated.
4. The assessment u/s 153C has to remain confined to the documents/assets belonging to the other than searched person.
5. Separate satisfaction note has to be recorded even when the AO of the searched person as well as the other than searched person is the same.
The appellant's case fails on all the aforesaid propositions of law and the assessment, therefore, deserves to be quashed. LIMITED SCOPE OF ASSESSMENT UNDER SECTION 153C/ 153A Perusal of Section 153C as quoted earlier in this submission, clearly indicates that the assessments where proceedings are initiated u/s 153C are required to be completed in accordance with the substantive provisions for assessment as laid down under section 153A of the Act.Hon'ble jurisdictional High Court has reaffirmed the aforesaid proposition of law.
What is the scope of assessment and what are the restrictions of assessment u/s 153A has been a matter of long controversy. In recent times there is near judicial unanimity on the limited scope of assessment u/s 153A/153C. Now in the years where assessments have abated the scope of assessments is restricted to the incriminating documents found during the course of search. Perusal 28 of the assessment orders would undisputedly reveal that there was no incriminating document whatsoever which was found during the course of search and which has been referred in the assessment order. Leave alone an incriminating document, no document whatsoever has been mentioned in the assessment order.
We wish to refer to the following cases in support of our submission that the assessment u/s 153C should have been confined to the incriminating documents found during the course of search. As there is no incriminating document on which assessment/ additions have been based, entire additions made in the assessment order and all the conclusions drawn in the assessments need not be taken any cognizance of.
For the aforesaid proposition we wish to place reliance on the following rulings:-
i. Gurinder Singh Bawa (2012) 28 Taxmann.com 328 (Mum.) ii. Kusum Gupta ITA No. 4873/Del/2009 dated 28.03.2013 iii. Alcargo Global Logistics Ltd Vs DCIT (2012) 137 ITR 287/23 Taxmann.com-103 (Mum) (SB) iv. Anil Kumar Bhatia (2012) 211 Taxmann.com 453 (Delhi)/2013 352 ITR 493 v. ACIT v. Pratibha Industries (2012) 28 Taxmann.com (Mum.) vi. Pradeep Kumar Kumra ITA No. 4016/Delhi/2011 dated 07/11/2013 vii. MGF Automobiles Ltd ITA No 4212 & 4213/Del/2011 dated 28/06/2013 29 viii. Jai Steel (India) Jodhpur vs. ACIT ITA No. 53/2011 order dated 24/05/2011 ix. JCIT Vs. Spectrum Pearls & Exports Pvt. Ltd. ITA No. 2107 to 2113/Hyd./2011 order dated 04/04/2012 x. Sanjay Aggarwal Vs. DCIT ITA No. 3184/Del/2013 Order dated 16/06/2014 xi. Dream Buildcon Pvt. Ltd. ITA No. 5392/Del/2012 Order dated 22/11/2013 xii. ShriGovindAgarwal vs. ACIT ITA No. 339/Mum/2011 dated 10.01.2014 xiii. Jail Steel (India) Ltd (Rajasthan HC) 219 Taxmann 223 dated 24.05.2013 xiv. PACL India Ltd ITA No. 2637/Del/2010 dated 20.06.2013; [2013]-TIOL-734-ITAT-DEL.
xv. Jakson Engineering Ltd. ITA No. 349 & 350/ Del/2013 dated 11/04/2014 xvi. VK Fiscal Services (P) Ltd. ITA No. 5460 to 5465/D/2012 dated 27.11.2013 xvii. ACIT vs. ManojNarainAggarwal, ITA No. 5518/D/2012 dated 30.01.2014 xviii. Marigold Merchandise (P) Ltd Vs DCIT ITA No 2666/D/2013 dated 27.12.2013 xix. Kabul Chawla vs. ACIT ITA No 779/D/2013 dated 23.05.2014 xx. CIT (C)-III vs. Kabul Chawla (Delhi) ITA No 707/2014 xxi. CIT (C)-I vs. MGF Automobiles Ltd. (Delhi) ITA No. 13,14/2014 xxii. Pr. CIT vs. Kurele Paper Mills (P) Ltd (Delhi) ITA No. 369/2015 xxiii. DCIT vs. Kurele Paper Mills (P) Ltd, ITA No. 3761/Del/2011 (ITAT Delhi) 30 As the perusal of the assessment order undisputedly indicates that no reference whatsoever has been made to any material found/ seized during the course of search. The assessments are, therefore, clearly outside the scope of assessments u/s 153C which are required to be passed in accordance with the methodology laid down in section 153A of the Act. The appellant, therefore, deserves relief on this ground as well.
In the Kabul Chawla case, (Copy of the order attached at Paper Book Pg 91-116)Hon'ble jurisdictional High Court has laid down following propositions of law..
37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under:
i. Once a search takes place under Section 132 of the Act, notice under Section 153 A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place.
ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise.
iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax".
iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without 31 any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material."
v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings.
vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO.
vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment"
In the case of the appellant the assessment has not been restricted/based to incriminating documents. Assessments are therefore, unsustainable for this reason as well.
10.5 The Ld AR has further relied upon a number of cases pertaining to the assessee group to argue that identical action of assumption of jurisdiction based on the identical material was quashed by the Hon'ble Tribunal and the aforesaid orders quashing the assessments were accepted by the Hon'ble Delhi High Court. Relevant detailed specific details have been given in written submission filed during the course of proceedings. It was emphasized that there was absolutely no difference between the facts of those matters and the facts of the present appeals. It was further submitted that in the present bunch of four appeals which 32 are subject matter of adjudication here two pertains to the appellant Global Heritage Venture Limited ( ITA Numbers 1335 & 1336/Del/2013) whose own cases for AY 2008-09 ( ITA number 3196/Del/2013) and AY 2009-10 ( ITA number 3197/Del/2013) were decided by the Hon'ble Tribunal vide orders dated dated 26/12/2014 and 21/06/2016 respectively and it was held that the issuance of notice and consequent assessments u/s 153C were bad in law and the same were quashed. It was stated that the department's appeals under section 260A against the order for AY 2008-09 (ITA number 3196/Del/2013) has already been dismissed by the Hon'ble Delhi High Court vide its order dated 08/07/2015. The AR further argued that the jurisdiction for assessments for AY 2003-04 and AY 2004-05 by the AO has been assumed by the AO on the same satisfaction notes and same facts and circumstances as for AY 2008-09 which has been quashed by the Hon'ble Tribunal and approved by the Hon'ble High Court. It was submitted that the matters in appeal (ITA 1335 & 1336/Del/2013) are, therefore, specifically and fully covered in favor of the appellant. With respect to the other two appeals also there is no difference in the facts of the matter. 10.6 The Ld AR has submitted that the Hon'ble jurisdictional High Court has given very substantive and detailed findings on various propositions of law concerning assessments under section 153C and 153A.
11. On the contrary, Ld. CIT(DR) strongly opposed the admission of additional grounds (legal) raised by the assessee. In support of his 33 contention, he filed the WS on behalf of the Revenue (on admission of Additional ground) which read as under:-
"1.1 There is no quarrel that courts have ruled that appellate authorities have powers to entertain new claim. However, this does not mean that it is a privilege of the assessee to get any claim entertained at any stage as per assessee's sweet will. 1.2 The basic jurisdiction of ITAT is from 253(1) which drives jurisdiction from the position that the appellant (assessee) should be aggrieved by the order of the lower authority(impugned order). Once a ground has not been taken before lower authority, the question of being aggrieved does not arise. Therefore, in normal course, these ground is beyond the scope of the appeal as per provisions contained in section 253(1).
1.3 As a natural corollary, it is necessary to pin point with reference to the impugned order as to where exactly the lower authority erred. However, in present case, the Assessee has failed to do so.
1.4 The satisfaction note which is sought to be examined under this appeal by this additional ground) has not been examined under the impugned order or the order which was subject matter of impugned order, purely because the assessee failed to raise it at appropriate time. 34
2. Therefore, it is certainly a case where the assesee is asking the Hon'ble IT AT to go beyond normal' and invoke exceptional powers:
3.1 As per scheme of the IT Act, 1961, all claims are to be made at the earliest. The time and occasion are prescribed. 3.2 The Hon'ble Delhi High Court in case of Commissioner of Income-tax, Central-I Vs. Manish Build Well (P.) Ltd. [2011] 16 taxmann.com 27 (Delhi) has relied upon ratio of 7- Judge Bench judgment of Hon'ble Supreme Court in case of Keshav Mills Co. Ltd. v. CIT [1965] 56 ITR 365 and returned a ratio that assessee make all claims and adduce the entire evidence in his possession at the earliest point of time. This ensures fun, fair and detailed enquiry and verification. The relevant portion of the judgment is reproduced as under: "22 . .......
The fundamental rule which is valid in all branches of law, including Income Tax Law, is that the assessee should adduce the entire evidence in his possession at the earliest point of time. This ensures full, fair and detailed enquiry and verification. A 7-Judge Bench of the Supreme Court in Keshav Mills Co. Ltd. v. CIT [1965] 56 ITR 365 had observed as under-
35 "Proceedings taken for the recovery of tax under the provisions of the Act are naturally intended to be over without unnecessary delay, and so, it is the duty of the parties, both the department and the assessee, to lead all their evidence at the stage when the matter is in charge of the Income-tax Officer."
3.3 The provisions of Rule 11 of the Income-Tax (Appellate Tribunal) Rules, 1963 is in conformity to this fundamental rule and reads as under, "The appellant shall not, except by leave of the Tribunal, urge or be heard in support of any ground not set forth in the memorandum of appeal, but the Tribunal, in deciding the appeal, shall not be confined to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal under this rule:
Provided that the Tribunal shall not rest its decision on any other ground unless the party who may be affected thereby has had a sufficient opportunity of being heard on that ground."(emphasis supplied).
3.4 The provisions of section 124(3) of the IT Act, 1961 is in conformity to this fundamental rule and reads as under, 36 "(3) No person shall be entitled to call in question the jurisdiction of an Assessing Officer-
(a) where he has made a return under sub-section (1) of section 115WD or under sub-section (1) of section 139~ after the expiry of one month from the date on which he was served with a notice under sub-section (l) of section 142 or sub-section (2) of section 115WE or sub-section (2) of section i43 or after the completion of the assessment, whichever is earlier;
(b) where he has made no such return, after the expiry of the time allowed by the notice under sub-section (2) of section 115WD or sub-section (1) of section 142 or under sub-section (1) of section 115WH or under section 148 for the making of the return or by the notice under the first proviso to section 115WF or under the first proviso to section 144] to show cause why the assessment should not be completed to the best of the judgment of the Assessing Officer, whichever is earlier."
3.5 The provisions of Rule 46A of the IT Rule, 1962 is in conformity to this fundamental rule.
3.6 The provisions of Rule 29 of the Income-Tax (Appellate Tribunal) Rules, 1963 is in conformity to this fundamental rule.
373.7 The ratio of Hon'ble Supreme Court in case of Goetze India Ltd Vs CIT 284 ITR 323(5(:)/ 2006-TIOL-198-SC-IT (that the Assessing Officer cannot entertain a claim for deduction otherwise than by filing a revised return) is in conformity to this fundamental rule. Also, another ratio of Hon'ble Supreme Court in the same judgment (that the power of the Tribunal under section 254 of the Income-tax Act, 1961, is to entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised before the Tribunal) is in conformity to this fundamenta1 rule and tile relevant portion reads as under, "The question. raised in this appeal relates to whether the appellant assessee could make a claim for deduction other than by filing a revised return.
........The appellant sought to claim a deduction by way of a letter before the Assessing Officer. The deduction was disallowed by the Assessing Officer on the ground that there was no provision under the Income-tax Act to make amendment in the return of income by modifying an application at the assessment stage without revising the return.
This appellant's appeal before the Commissioner of Income- tax (Appeals) was allowed. However, the order of the further 38 appeal of the Department before the Income-tax Appellate Tribunal was allowed. The appellant has approached this court and has submitted that the Tribunal was wrong in upholding the Assessing Officer's order. He has relied upon the decision of this court in National Thermal Power Company Ltd. v. CIT [1998] 229 ITR 383" to contend that it was open to the assessee to raise the points of law even before the Appellate Tribunal.
The decision in question is that the power 'of the Tribunal under section 254 of the Income-tax Act, 1961, is to entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised before the Tribunal. The decision does not in any way relate to the power of the Assessing Officer to entertain a claim for deduction otherwise than by filing a revised return. In the circumstances of the case, we dismiss the civil appeal."
3.8 The ratio of Hon'ble Supreme Court in case of GKN Driveshafts (India) Ltd. Vs. Income-tax Officer [2002] 125 TAXMAN 963 (SC) is in conformity to this fundamental rule and the relevant portion reads as under, ".......
However, we clarify that when a notice under section 148 of the Income Tax Act is issued, the proper course .of action for 39 the noticee is to file return and if he so desires, to seek reasons for issuing notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose .of the same by passing a speaking order."
3.9 The ratio of Hon'ble Supreme Court in case of Additional CIT Vs. Gurjargravures P. Ltd. {1978] 111 ITR 1 (SC) { that claim for exemption not made before AO and no material on record supporting such claim cannot be made before AAC is in conformity to this fundamental rule and the relevant portion of head notes reads as under, "Held, reversing the decision of the High Court, that, as neither was any claim made before the Income-tax Officer regarding the relief under section 84 nor was there any material on record in support thereof, and from the mere fact that such a claim had been allowed in subsequent years it could not be assumed that the prescribed conditions justifying a claim for exemption under section 84 were also fulfilled, the Tribunal was not competent to hold that the Appellate Assistant Commissioner should have entertained the question of relief under section 84 or to direct the Income-tax Officer to allow the relief."
40 3.10 It is trite that one cannot be allowed to do something indirectly which he/she is prohibited to do directly. The reliance is placed on the decision of Hon'ble Delhi High Court In case of MTNL Vs. TRAI AIR 2000 Delhi 208.
3.11 As stated earlier, there is no quarrel about the preposition that the Appellate Authorities have power to entertain for the r1TS1: time a point of law provided the fact on the basis of which the issue of law can be raised before the Appellate Authority. However, this power has be exercised in the harmony of the above stated fundamental Rule which means that it is to be exercised in really exceptional circumstances. Of course, it has to exercised in judicious manner as observed by Hon'ble Bombay High Court in case of Inventors Industrial Corporation Ltd. Vs. Commissioner Of Income-Tax [1992] 194 ITR 548 (Born). The relevant portion of the judgment is as under:
" ................The law in this regard is, thus, to be taken as sett{ed. The powers of the first appellate authority, whether the Appellate Assistant Commissioner or the Commissioner of Income-tax (Appeals) are coterminous with those of the Income-tax Officer, subject to the limit that these authorities could do all that the Income-tax Officer could do or have done. It is a different thing whether, in a given case, these 41 authorities might or might not entertain a ground not urged before the Income-tax Officer in the exercise of their judicial discretion. It cannot, however, tie said that they have no jurisdiction to do so."( emphasis supplied).
3.12 In this regard, Three judges Bench of Hon'ble SC has laid down the law while delivering the judgment in case of NATIONAL THERMAL POWER COMPANY LIMITED Vs CIT2002- TIOL-279-SC-IT-LB. The relevant portion of the judgement is reproduced as under:-
" This court further observed that there may be several factors justifying the raising of a new plea in an appeal and each case has to be considered .on its own facts. The Appellate Assistant Commissioner must be satisfied that the ground raised was bona fide and that the same could 11ut nave been raised earlier for gaud reasons. The Appellate Assistant Commissioner should exercise his discretion in permitting or not permitting the assessee to raise an additional ground in accordance with Jaw and reason. The same observations would apply to appeals before the Tribunal also."(emphasis supplied).
3.13 From the above, it can be summarized that this power can be exercised in the cases where assessee 42 proves that (at least) all the following conditions are satisfied:
1) There are really exceptional circumstances to exercise the power vested in the Appellate Authority.
2) There were circumstances beyond control of the assessee due to which claim c.ould not be made at the earliest possible. opportunity.
3) All the facts related to the issue are already before the appellate authority.
4) No prejudice would be caused to the revenue by entertaining the claim at this stage vis-a-vis the time when it should have been made for the first time as per prescribed procedure.
4.1 It is not the simple case that grounds being raised now emanate from the impugned order and assessee just omitted to mention the same in the grounds submitted before Hon'ble ITAT (along-with Form No.
36).
4.2 Moreover, Hon'ble SC in case of Goetze India Ltd Vs CIT(Supra) observed as under, ".... The decision in question is that the power of the Tribunal under section 254 of the Income-tax Act, 1961, is to entertain for the 43 first time a point of law provided the fact on the basis of which the issue of law can be raised before the Tribunal ..... " (emphasis supplied).
5.1 Assessee made no case that there are realty exceptional circumstances to exercise the power vested in the Appellate Authority. In fact, record show that assesee had sufficient opportunities to raise such claim entertained at the lower level.
5.2 Assessee belong to a big business group (Rajdarbar). It is having luxury of best professional advice. There were DO circumstances beyond control of the assessee due to which the issues covered by the 'additional grounds' could not have raised at the AO or CIT(A) stage.
5.3 In fact it was mandatory to raise such objections in terms of The ratio of Hon'ble Supreme Court in case of GKN Driveshafts (India) Ltd. Vs. Income-tax Officer(supra).
5.4 All the facts related to the issues are not before the ITAT. Assessee's newground would require examination of contents of seized Hard Disk as the same has been mentioned in the satisfaction note.
44 5.5 Certainly prejudice would be caused to the revenue by entertaining the grounds at this stage because:
i. Claims made by the checked/verified/investigated by resources at its command.
ii. Had these grounds were raised in the beginning, assessee are supposed the revenue which has to be limited
a) the revenue could have taken recourse to further enquiry u/s 133(6)/147.
b) examination of assesee's stand at earlier point would have lead to initiation of action in some other cases in terms of various sections of the IT Act, 1961.
c) However, with the passage of time, the process evidence gathering becomes more and more difficult.
Moreover, now powers of revenue authorities are circumvented by time limitation.
6.5.1 Therefore, it is certainly a case .where the assesee is asking the Hon'ble ITAT to go beyond normal and invoke exceptional powers and therefore, very heavy onus is upon the appellant to show (cumulatively) that 45
i) There exist really exceptional circumstances where exercise of this power is necessary,
ii) beyond any show of doubt, there were circumstances which prevented it from making such claim at earliest point of time, and
iii) No prejudice shall be cast upon the revenue if such claim is entertained, now.
6.5.2 Assesee has failed to demonstrate that any of the above conditions is fulfilled (what to talk of fulfilling all). 7.1 Also, from the above, it is clear that the assessee has to demonstrate that fact on the basis 'of which the issue of law can be raised are already before the Appellate Authority.
7.2 The assessee has no where demonstrated that the facts which are necessary to adjudicate the claim are already before, Hon'ble ITAT. Assessee's new ground would require examination of contents of seized Hard Disk as the same has been mentioned in the satisfaction note and contents of the Hard Disk is not before the Hon'hle ITAT.
8.1 Even in a situation where the assessee is able to demonstrate that the facts which are necessary to 46 adjudicate the ground are already before, Hon'ble ITAT, it is not mandatory to accept such claim. The Appellate Authority is obliged to exercise this power of entertaining of new claim in judicious manner keeping conditions mentioned in para 6.5.1, above.
8.2 The very important requirement for exercise of this power, judicially is that assessee is obliged to demonstrate that he/she/it was stopped by factors beyond his/her/its control to make such claim at the earlier occasion and after that the factors continued to stop it from making such claim till date the claim was made by the assessee by way of the application under consideration.
8.3 To sum-up, in the present case assessee has not discharged onus of demonstrating that
i) it was stopped by factors beyond his/her/its control to make such claim at the earlier occasion(as stated in para 5.2 above, the assesee is part of big group and had all resources to avail the opportunity at appellate stage and it was stopped by no such factor),
ii) after that the factors continued to stop it from making such claim till date the claim was made by the assessee by way of the application under consideration 47 as the assesee was not stopped in first place, there is no question of being stopped, later),
iv) there exist really exceptional circumstances where exercise of this power is necessary(as stated in para 5.2 above, the assesee is part of big group and had all resources to avail the opportunity at appellate stage),
v) the revenue is not prejudicedtas stated in para 5.5 above, the revenue is prejudiced),
vi) the facts which are necessary to adjudicate the ground are already before, Hon'ble ITAT (as stated in para 7.2 above, Assessee's new ground would require examination of contents of seized Hard Disk as the same has been mentioned in the satisfaction note and contents of the Hard Disk is not before the Hon'ble ITAT)."
11.1 Ld DR also brought to the notice of the Bench two recent cases decided by Hon'ble Delhi High Court. One is ITA number 58 of 2017 in the case of Nau Nidh Overseas Pvt Ltd by order dated Feb 03, 2017. Through this the Ld DR has sought to argue that Hon'ble Delhi High Court decided this case relying upon Super Malls Pvt Ltd 2016-TIOL-2953-HC-Del-IT dated 22/11/2016 to canvass the argument that if the AO of the searched party and the other party in whose case action under section 153C is taken then there should not be need of recording two satisfaction notes 48 i.e. one by the AO of the searched person and other by the AO of the other person. Other point emphasized by the Ld DR was that in these judgements it has been held that the term 'belonged to' must not be too literally interpreted rather the meaning of 'belonged to' should be seen akin to related to. It was also stated that these rulings held that one should not be hyper technical with regard to satisfaction note. 11.2 Ld. DR reiterated the written submissions as mentioned above and further relied upon the orders of the authorities below and stated that the provision of section 153 has rightly been applied in the case of the assessee on the material available with them and further stated that the case of the assessee is covered against the assessee by the decision dated 22.11.2016 of the Hon'ble High Court of Delhi in the case of Pr. CIT vs. M/s Super Malls Pvt. Ltd. passed in ITA No. 449/16 & Ors. Reported in 2016-TIOL-2953-HC-DEL-IT and decision dated 3.2.2017 passed in the case of Pr. CIT vs. M/s Nau Nidh Overseas Pvt. Ltd. reported in 2017-TIOL-389-HCV-DEL-IT.
12. However, Ld. Counsel of the assessee in his counter arguments has stated that the facts of these cases need to be understood in greater details.
In the Super Malls case (Supra) following compelling and distinguishing facts emerge from the order;
1. The Counsel of the assessee had 'conceded' that recording of separate satisfaction could not be insisted upon. 49
2. Print outs taken from the pen drive seized contained details of cash received/undisclosed income on sale of shops offices belonging to the assessee Super Mall in whose case 153C action was taken
3. During the course of the search the person who was searched was also a director in M/s Super Malls and, therefore, admitted in twin capacities that the cash/undisclosed sale documents pertained to M/s Super Mall.
In the Nau Nidh Overseas case (Supra) following compelling and distinguishing facts emerge from the order;
1. Cash of Rs 10 Lac which was seized in the case of searched person who was the director of the company admittedly belonged to the assessee in whose case action under section 153C was taken
2. There was no dispute with respect to the aforesaid fact by the assessee.
12.1 Ld. Counsel for the assessee further stated that it is very clear that in both the above cases, relied by Ld DR, Hon'ble Court upheld the assumption of jurisdiction under section 153C on account very compelling specific facts evidencing that the documents/assets not only belonged to those person but those documents assets evidenced clear existence of undisclosed income. Confessional statement that the assets/document belonged to the person in whose case action under section 153C was taken was made by the directors of the very same companies who were subjected to the 153C proceedings. Also, there was no dispute in these two cases (either from the searched party or the other party) as to whom 50 the documents/assets belonged to. On account of these compelling and exceptional circumstances, it appears; the Hon'ble Court held that the law should not be interpreted too literally. Hon'ble Court perhaps was also persuaded by the admission of the assessee's counsel that he did not want to insist on the need for recording of separate satisfaction when the AO of the searched person and the other person was the same. This concession made by the counsel of the assessee was against the Board Circular number 24/2015 dated 31/12/2015 and detailed ruling of the Hon'ble Delhi High Court in the case of PepsiCo India Holdings (P.) Ltd v ACIT [2014] 50 taxmann.com 299 (Delhi) & Pepsi Foods Pvt. Ltd v ACIT [W.P. (C) 415/2014 & CM 823/2014, RRJ Securities , CIT V/s Kabul Chawla 380 ITR 573. Law laid down by the aforesaid detailed rulings of the Hon'ble Court can be summed up as under;
1. It is necessary that the satisfaction is recorded by the assessing officer of the entity in whose case the document/ asset has been seized to the effect that the relevant document/ asset belong to the other person in whose case action under section 153C is contemplated.
2. It is essential to establish that the document belongs to the person in whose case action u/s 153C is contemplated.
3. Mere photocopies or the data copy doesn't lead to inference that the data copy/photo copy belonged to the person two whom original belonged to.
4. Entries in a dairy do not necessarily mean that the diary belonged to everyone whose name is mentioned in that diary. 51
5. The assessing officer of the entity before initiating process under section 153C has to record a separate satisfaction that the document/ asset belong to the person in whose case action under section 153C is required to be initiated and also he has to record satisfaction that the document/ asset have significance on the assessment of income of the person in whose case action u/s 153C is required to be initiated.
6. The assessment u/s 153C has to remain confined to the documents/assets belonging to the other than searched person.
7. Separate satisfaction note has to be recorded even when the AO of the searched person as well as the other than searched person is the same.
8. In the search cases under section 153A/153C additions have to be confined to the incriminating material found and seized during the course of the search.
12.2 It was further submitted by the ld. Counsel of the assessee that finding in the aforesaid rulings of the Hon'ble High Court lays down very detailed propositions of law as mentioned above and it cannot be said that that the two orders relied upon by the Ld DR in any manner overrules or modifies those detailed and exhaustive propositions and interpretation of law. Coming to the facts of the appeals under consideration there is no such evidence linking the assets/ documents found or seized during the course of search belonged to the appellants who were subjected to 153C. In fact there is no mention whatsoever of any evidence seized with regard to the additions made by the AO. In the facts of the present appeal, therefore, the two cases relied by Ld CIT DR are absolutely inapplicable as the satisfaction notes recorded by the AO in the appeals under consideration do not mention any material which can be said to have any 52 indication of the undisclosed income. Even the assessment orders do not even mention the alleged material belonging to the appellants leave alone making any addition on the basis of those documents which were apparently the cause of initiating action under section 153C. 12.3 It was further submitted that the case law cited by the Ld. Counsel of the assessee that the Law laid down by the Hon'ble jurisdictional court in the cases of PepsiCo India Holdings (P.) Ltd v ACIT [2014] 50 taxmann.com 299 (Delhi) & Pepsi Foods Pvt. Ltd v ACIT [W.P. (C) 415/2014 & CM 823/2014, RRJ Securities , CIT V/s Kabul Chawla 380 ITR 573 among other has by no stretch of imagination reviewed by the Hon'ble High Court by way of the judgements relied upon by Ld DR. Some of the very recent cases of the Hon'ble jurisdictional High Court which have followed /upheld the propositions/interpretation of law as detailed above are as under;
1. Rajeev Behl ( ITA- 84 to 86/2017) Date of order: 06/02/2017
2. Gurnam Arora ( ITA- 669/2016) Date of order: 10/02/2017
3. Baba Global Ltd ( ITA 938/2016) Date of order 23/12/2016
4. DMA Investments Pvt Ltd ( ITA-767-768/2016) Date of order 04/11/2016
5. Marichika Properties Pvt Ltd ( ITA 633/634/2016) date of order 19/10/2016
13. We have heard both the parties and perused the records and the case laws relied upon by both the parties, we are of the considered view that the additional grounds are on the assumption of jurisdiction u/s 53 153C of the Act besides the scope of assessment u/s 153A/153C of the Income Tax Act, 1961. In our opinion, the additional grounds of appeal are in the nature of legal and it is well settled law that the additional grounds of appeal which are legal in nature or which raises question of law or which involve interpretation of circular/notification etc can be taken up first time at any level of adjudication. Even those additional grounds which are based on fresh evidences are also normally admitted if the additional evidences are found admissible in accordance with Rule 29 of the ITAT Rules. This view is fortified by the judgment of the Hon'ble Supreme Court of India delivered in the case of National Thermal Power Corporation Limited (1998) 229 ITR 383 (SC) wherein the Hon'ble Supreme Court of India has held that;
"Under section 254, the Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. There is no reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner (Appeals). Both the assessee as well as the 54 department has a right to file appeal/cross objections before the Tribunal. There is no reason why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier.
The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner (Appeals) takes too narrow a view of the powers of the Tribunal. Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee.
In the instant case, therefore, the Tribunal had jurisdiction to examine a question of law which arose from the facts as found by the lower authorities and having a bearing on the tax liability of the assessee."
13.1 In view of the decision of the Hon'ble Supreme Court of India in the case of NTPC Limited 229 ITR 383 (Supra) and keeping in view of the facts and circumstances of the case circumstances of the case, we are of the view that the additional grounds raised by the assessee are purely legal grounds and do not require fresh facts which is to be investigated and goes to the root of the matter. In the interest of justice, we admit the following two common additional grounds raised by the assessee.
1. "The Ld. CIT(A) has erred on facts and in law in confirming the assessment of the appellant passed 55 without satisfying the substantive and procedural requirements under section 153C of the Income Tax Act.
2. Without prejudice to the other grounds of appeal, the Ld. CIT(A) has erred on facts and in law in confirming the additions which were not based on the incriminating material found and seized during the course of search." 13.2 Keeping in view of the facts and circumstances of the case, in the interest of justice and for the sake of convenience, we proceed to adjudicate upon the common legal additional ground no. 2 only. 13.3 Ld. CIT(DR) has brought to our notice two recent cases decided by Hon'ble Delhi High Court. One is ITA number 58 of 2017 in the case of Nau Nidh Overseas Pvt Ltd by Order dated Feb 03, 2017. Through this the Ld DR has sought to argue that Hon'ble Delhi High Court decided this case relying upon Super Malls Pvt Ltd 2016-TIOL-2953-HC-Del-IT dated 22/11/2016 to canvass the argument that if the AO of the searched party and the other party in whose case action under section 153C is taken then there should not be need of recording two satisfaction notes i.e. one by the AO of the searched person and other by the AO of the other person. Other point emphasized by the Ld DR was that in these judgements it has been held that the term 'belonged to' must not be too literally interpreted rather the meaning of 'belonged to' should be seen akin to related to. It 56 was also stated that these rulings held that one should not be hyper technical with regard to satisfaction note. 13.4 We find that in the case of Super Malls case (Supra) following compelling and distinguishing facts emerge from the order;
1. The Counsel of the assessee had 'conceded' that recording of separate satisfaction could not be insisted upon.
2. Print outs taken from the pen drive seized contained details of cash received/undisclosed income on sale of shops offices belonging to the assessee Super Mall in whose case 153C action was taken
3. During the course of the search the person who was searched was also a director in M/s Super Malls and, therefore, admitted in twin capacities that the cash/undisclosed sale documents pertained to M/s Super Mall.
13.5 We further find that in the case of Nau Nidh Overseas case (Supra) following compelling and distinguishing facts emerge from the order;
1. Cash of Rs 10 Lac which was seized in the case of searched person who was the director of the company admittedly belonged to the assessee in whose case action under section 153C was taken
2. There was no dispute with respect to the aforesaid fact by the assessee.
13.6 From the aforesaid, it is very clear that in both the above cases, relied by Ld CIT(DR), Hon'ble High Court upheld the assumption of jurisdiction under section 153C on account very compelling specific facts evidencing that the documents/assets not only belonged to those person but those documents assets evidenced clear existence of undisclosed income. Confessional statement that the assets/document belonged to 57 the person in whose case action under section 153C was taken was made by the directors of the very same companies who were subjected to the 153C proceedings. Also, there was no dispute in these two cases (either from the searched party or the other party) as to whom the documents/assets belonged to. On account of these compelling and exceptional circumstances, it appears; the Hon'ble Court held that the law should not be interpreted too literally.
13.7 After perusing the assessment order as well as appellate order, we find that in the present case the AO has completed the assessment u/s. 153C of the I.T. Act, 1961 and made the addition in dispute without any incriminating material found during the search and seizure operation and the addition in this case was purely based on the material already available on record, which is not sustainable in the eyes of law, hence, needs to be deleted. Also on the perusal of the assessment order undisputedly indicates that no reference whatsoever has been made to any material found/ seized during the course of search. Our aforesaid view is fully supported by the decision of the Hon'ble Delhi High Court in the case of CIT V/s Kabul Chawla 380 ITR 573, wherein the Hon'ble High Court has held has under:-
"37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned ITA Nos. 707, 709 and 713 of 2014 of decisions, the legal position that emerges is as under:
i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six Ays immediately preceding the previous year relevant to the AY in which the search takes place.
58 ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise.
iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax".
iv. Although Section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an ITA Nos. 707, 709 and 713 of 2014 of assessment has to be made under this Section only on the basis of seized material."
v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings.
vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis 59 of the findings of the search and any other material existing or brought on the record of the AO.
vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment.
38. The present appeals concern AYs, 2002-03, 2005-06 and 2006-07.On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed."
14. Respectfully following the precedent of the Hon'ble Jurisdictional High Court in the case of Kabul Chawal (Suar), we delete the addition in dispute and allow the appeal of the Assessee being ITA No. 1245/Del/2014 (AY 2005-06), because AO has completed the assessment and made the addition in dispute without any incriminating material found during the search and seizure operation and the addition in this case was purely based on the material already available on record, which is not sustainable in the eyes of law. Accordingly, the additional legal ground no. 2 raised by the assessee in the appeal is allowed. Since we have already deleted the addition in dispute, the additional ground no. 1 and other grounds raised in the appeal have become academic in nature, hence, the same are not adjudicated upon.
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15. Following the consistent view adopted in ITA No. 1245/Del/2014 (AY 2005-06) in the case of Global Realty Creations Ltd. DCIT, CC-12, New Delhi, as aforesaid, the additions in dispute involved in other Appeals of the separate Assessees being ITA Nos.1335-1336/Del/2014 (AYrs. 2003-04 & 2004-05) in the case of Global Heritage Venture Ltd. vs. DCIT and ITA No.1341/Del/2014 (AY 2004-05) in the case of Global Televenture Ltd. vs. DCIT are hereby deleted and the Appeal of the assessees stand allowed.
16. In the result, all the 4 Appeals filed by the Assessee stand allowed.
Order pronounced in the Open Court on 07/04/2017.
SD/- SD/-
[O.P. KANT] [H.S. SIDHU]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Date 07/04/2017
"SRBHATNAGAR"
Copy forwarded to: -
1. Appellant -
2. Respondent -
3. CIT
4. CIT (A)
5. DR, ITAT TRUE COPY
By Order,
Assistant Registrar, ITAT, Delhi Benches
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