Income Tax Appellate Tribunal - Delhi
M/S. Prabhatam Developers Ltd., New ... vs Ito, New Delhi on 9 February, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES "F" : DELHI
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
AND
SHRI L.P. SAHU, ACCOUNTANT MEMBER
ITA.Nos.4307,4308 & 4309/Del./2016
Assessment Years 2007-2008, 2008-09 & 2010-2011,
The Income Tax Officer, M/s. Prabhatam Developers
Ward-20(1), Room No.218, vs. Ltd., 38, Rasthrya Tower,
2nd Floor, C.R. Building, Rani Jhansi Road, New
New Delhi. Delhi 110055 PAN
AAECP0839P
(Appellant) (Respondent)
Cross Objection Nos.2, 3 & 4/Del./2017
Arising out of
ITA.Nos.4307, 4308 & 4309/Del./2016
Assessment Years 2007-2008, 2008-2009 & 2010-2011,
M/s. Prabhatam
The Income Tax Officer,
Developers Ltd., 38, vs.
Ward-20(1), Room No.218,
Rasthrya Tower, Rani
2nd Floor, C.R. Building,
Jhansi Road, New Delhi
New Delhi.
110055 PAN AAECP0839P
(Cross-Objector) (Respondent)
For Revenue : Smt. Paramita Tripathy, CIT-D.R.
Shri Gautam Jain &
For Cross-Objector
Shri P.K. Kamal, Advocates.
Date of Hearing : 01.02.2018
Date of Pronouncement : 09.02.2018
2
ITA.Nos.4307, 4308 & 4309/Del./2016 and
C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers
Ltd., New Delhi.
ORDER
PER BHAVNESH SAINI, J.M.
The Departmental Appeals as well as Cross Objections by assessee are directed against different orders of the Ld. CIT(A)-7, New Delhi, dated 27th May, 2016, for the A.Ys. 2007-2008, 2008-2009 and 2010-2011.
2. The Department in all its appeals raised a common ground challenging the orders of Ld. CIT(A) in quashing the assessments observing that notice issued under section 153C of the Act is not valid and consequently, the assessments framed being legally unsustainable.
3. The Learned Counsel for the Assessee withdrew all the cross objections. The same are dismissed as withdrawn.
4. We have heard the learned Representatives of both the parties and perused the material available on record.
5. The issues in Departmental Appeals are identical and submissions of the parties are same. The findings of the Ld. CIT(A) and material on record are same in all the appeals. 3
ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
Therefore, the departmental appeals are decided together by taking facts from the A.Y. 2007-2008.
6. Briefly, the facts of the case are that the assessee- company filed return of income originally which was processed under section 143(1) of the I.T. Act, 1961. Subsequently, an information was received from ACIT, Circle-2, Gwalior vide letter dated 30th May, 2012 passing on certain seized documents relating to the assessee-company were found during the course of search in the K.S. Oil Group on 11th March, 2010. Thereafter, after duly recording satisfaction, notice under section 153C of the I.T. Act, 1961, was served upon the assessee-company. The assessee-company is a builder. The assessee-company was incorporated on 17th November, 2006. The assessee-company filed requisite details and documents at assessment stage. During the course of search at the office premises of K.S. City P. Ltd., and M/s. Jagannath Impex P. Ltd., at Indore, the document LPS-6 was seized, out of which, Page No-1 is related to the assessee-company. The document is a letter written by 4 ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
Shri Ashish Gupta, Director of M/s. K.S. City P. Ltd., to his father-in-law Shri Ramesh Chand Garg, Chairman, M/s. K.S. Oil Group, in which he has described the land acquisition and development deals that have taken place between the assessee- company and M/s. K.S. City P. Ltd., for land at Bypass road, Indore, Khandwa Road and Pithampura. This letter has been faxed to Shri Ramesh Chand Garg at the Morena Office on 29th May, 2009 as mentioned on the overleaf of this page. This letter describes the transaction on land acquisition/development at Bypass road @ Rs.47.50 lakhs per acre. In this deal, share of the assessee-company is shown at 10% and M/s. K.S. City P. Ltd., of 90% each respectively. The assessee-company was required to explain Page-1 of LPS-6, giving complete details of source of investment, treatment in its books of account along with documentary evidence for the same. The assessee- company submitted before A.O. that his company has advanced amounts to M/s. K.S. City P. Ltd., for the purpose of jointly developing colonies, but due to some differences, the agreement would not be executed and the deal was cancelled. The rates 5 ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
stated in the documents seized from the premises of M/s. K.S. City P. Ltd., are not relevant to assessee-company as this is some thing conveyed by Mr. Ashish Gupta to Mr. Ramesh Chandra Garg. During the course of search in O/o. Shri Sanjay Agarwal, Managing Director of M/s. K.S. Oils Ltd., a document LPS-4 was seized, out of which, Page Nos.69 and 70 are related to the assessee-company. This is chart of land acquired/ registered in the various companies of M/s. K.S. City Group. This chart shows total land acquired by M/s. K.S. Group at Bypass road at Rs.40.41 crores on 272.92 acres. As against this, the actual cost of land mentioned in the letter at page No.1, LPS-6 above is Rs.1229.63 crores @ Rs.47.50 lakhs per acre. The assessee-company was required to explain Page-70 of LPS- 4, giving complete details of source of investment, treatment in its books of account along with documentary evidence for the same. The copy of the show cause notice is reproduced in the assessment order in which the A.O. estimated on-money paid in different assessment years and estimated the amount of 6 ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
Rs.1,62,82,284 for A.Y. 2007-2008 and directed the assessee- company as to why this addition be not made. 6.1. The assessee-company filed reply before A.O. which is reproduced in the assessment order in which the assessee- company briefly explained as regards to Page Nos 65-70, assessee-company is unable to comment on this document as neither the seized documents contain the name of the assessee- company nor does it belong to the assessee-company as the same has been obtained from somebody else's office. The documents seems to be internal calculation of K.S. City and Group Companies. Page Nos.69 and 70 contains the details of land holding of K.S. City P. Ltd., and other companies. The assessee-company unable to comment on the status of the lands and the value stated in the chart as assessee-company did not have access to such internal calculation of such companies. The chart did not contain name of the assessee- company. The documents referred in the notice seems to be some internal Projections/calculations made by K.S. City Group 7 ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
for making proposals for joint development or such other associations.
6.2. With regard to Page-1, LPS-6, it was explained that land was to be purchased by K.S. City and Development was to be done by assessee-company. However, the assessee-company has not incurred a single penny on the development of the Khandwa Road lands as the agreement could not be consummated. Since the assessee-company has not proceeded with the agreement, therefore, making hypothetical addition is unjustified. It was further submitted that the seized paper stated to be letter written by Shri Ashish Gupta (son-in-law) to Shri Ramesh Chandra Garg (father-in-law). The assessee- company enquired from Shri Ashish Gupta regarding this and it is explained that he has not made any such letter because he cannot call his father-in-law as 'Chachaji' which is mentioned in the seized paper. None of these documents have been signed by the assessee-company. The assessee-company further explained that it has not purchased any land as is in the seized 8 ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
paper. The assessee-company has made payment to K.S. City Pvt. Ltd., Most of the documents are estimation/projection/ internal working of K.S. City Group without any confirmation from assessee-company. Hence, they do not belong to the assessee-company. There is no single evidence of any on-money payment have been brought on record except what is recorded in the books of account. The assessee-company has neither purchased nor sold land to K.S. City P. Ltd., Therefore, making addition is wholly unjustified. K.S. City Pvt. Ltd., has started repaying the amount to the assessee-company. The assessee- company further explained that it did not hold any beneficial ownership of any of the companies named in the seized paper/chart. The A.O. however, did not accept the contention of assessee-company and made the addition of Rs.1,62,82,284 on account of unexplained investment under section 69 of the I.T. Act in A.Y. 2007-2008 and passed order under sections 153C/143(3) of the I.T. Act and made similar additions in remaining assessment years of the different amounts on the same basis.
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ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
7. The assessee-company challenged the aforesaid additions before Ld. CIT(A) as well as challenged the assumption of jurisdiction under section 153C of the I.T. Act for all the assessment years.
7.1. The written submissions of the assessee-company challenging the above issues are reproduced in the appellate order in which the assessee-company briefly explained that the A.O. has mentioned in the assessment order under section 153C of the I.T. Act that information was received from ACIT, Gwalior that certain seized documents relating to assessee- company were found during the course of search in the case of K.S. Oil Group. It was further submitted that there is no satisfaction as per Section 153C of the I.T. Act. The assessee- company relied upon several decisions of the Tribunal in support of its contention. It was also submitted that A.O. has not referred to any material much less cogent material to assume and conclude with the documents seized from the premises of the searched person belongs to the assessee 10 ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
company and do not belong to searched person. It was submitted that in the absence of such a burden having been discharged by the searched person, invocation of provisions contained in Section 153C of the I.T. Act, is not in accordance with Law. The assessee-company relied upon the decisions of Hon'ble Delhi High Court in the case of Pepsi Foods Pvt. Ltd., vs. ACIT reported in 367 ITR 112 and Pepsi Co. India Holding Pvt. Ltd., 370 ITR 295. It was, therefore, submitted that since the foundational pre-condition has not been satisfied, therefore, A.O. has erred in Law and on fact in assuming jurisdiction under section 153C of the I.T. Act. It was submitted that it is an admitted position that all the documents admittedly are not belonging to the assessee-company. There is no material much less any tangible and relevant material to show that A.O. of the searched person was satisfied that seized documents do not belong to the searched person, so as to rebut the presumption under section 292C of the I.T. Act. There is no disclaimer on the part of the searched person in so far as the seized documents are concerned. The photo copy of the documents would not 11 ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
necessary mean and imply that they belong to the person who holds originally and unless it is established that the documents in question do not belong to the searched person, invocation of Section 153C of the Act is not valid.
8. The Ld. CIT(A) considering the satisfaction note, material on record in the light of submissions of the assessee- company and decisions of the Hon'ble Delhi High Court held that the issue of notice under section 153C of the I.T. Act, is not valid and accordingly, quashed the same. The resultant additions were accordingly, deleted. The findings of the Ld. CIT(A) in paras 2.2 to 2.12 of the order are reproduced as under:
2.2. I have carefully considered the assessment order and written submission filed by the Ld. AR. This ground relates to assumption of jurisdiction u/s 153C of the Act.
The AO on the basis of satisfaction note recorded by the AO of the searched person proceeded to assume jurisdiction and issued notice u/s 153C to the appellant company. The satisfaction note recorded by the AO of the searched person is as under:
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ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
SATISFACTION NOTE
SATISFACTION NOTE IN THE CASE OF
PRABHATAM DEVELOPERS LTD. (AAECP0839P) FOR THEA.Y. 2004-05 TO 2010-11 FOR TAKING ACTIION U/S 153C/148 OF THE INCOME TAX ACT. 1961.
During the course of search action at the premises of (Party No. 35 premises of M/s Chahat infrastructure Pvt. Ltd. 201 STARLIT TOWER, Y.N. ROAD. OPPOSITE TO HEAD OFFICE OF STATE BANK OF INDORE, INDORE (M.P.) certain incriminating documents (LPS-2 and LPS-6) were found and seized.
I am satisfied that the some documents/papers belongs to prabhatam developers hence, concern assessing officer is intimated to take necessary action u/s 1530/148 of the I.T. Act, 1961 for verification of the same.
(S.L. Katara) Asstt. Commissioner of Income Tax Circle-2, Gwalior"
2 3. The Ld. AR has argued that assumption of jurisdiction on the basis of the aforesaid satisfaction 13 ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
note is not as per provisions of law. He has contended that since no material belonging to the appellant company was seized in pursuance of search on the original person, the assumption of jurisdiction was otherwise not as per law.
2.4. The Hon'ble Delhi High Court in the case of Pepsi Foods (P) Ltd. vs. ACIT 367 ITR 112 has held as under:
"On a plain reading of section 153C, it is evident that the Assessing Officer of the searched person must be "satisfied" that, inter alia, any document seized or requisitioned "belongs to" a person other than the searched person. It is only then that the Assessing Officer of the searched person can handover such document to the Assessing Officer having jurisdiction over such other person (other than the searched person). Furthermore, it is only after such handing over that the Assessing Officer of such other person can issue a notice to that person and assess or reassess his income in accordance with the provisions of section 153A. Therefore, before a notice under section 153C can be issued two steps have to be taken. The first step is that the Assessing Officer of the person who is searched must arrive at a clear satisfaction that a document seized from him does not belong to him but 14 ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
to some other person. The second step is-- after such satisfaction is arrived at that the document is handed over to the Assessing Officer of the person to whom the said document "belongs". In the present cases, it has been urged on behalf of the petitioner that the first step itself has not been fulfilled. For this purpose it would be necessary to examine the provisions of presumptions as indicated above. Section 132(4A)(i) clearly stipulates that when, inter alia, any document is found in the possession or control of any person in the course of a search it may be presumed that such document belongs to such person. It is similarly provided in section 292C(1)(i). In other words, whenever a document is found from a person who is being searched the normal presumption is that the said document belongs to that person. It is for the Assessing Officer to rebut that presumption and come to a conclusion or "satisfaction" that the document in fact belongs to somebody else. There must be some cogent material available with the Assessing Officer before he/she arrives at the satisfaction that the seized document does not belong to the searched person but to somebody else. Surmise and conjecture cannot take the place of "satisfaction".15
ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
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 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.
This being the position the very first step prior to the issuance of a notice under Section 153C 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. 16
ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
The writ petitions are allowed as above. There shall be no order as to costs."
2.5. In the case of Pepsico India holding (P) Ltd. 370 ITR 295, the Hon'ble Delhi High Court has held as under:
"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 these documents as belonging to them. Unless and until it is established that documents do not belong to the searched person, the provisions of section 153C of the said Act do not 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 . ." 17
ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
In view or 'his phrase, it is necessary mm 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 in so far 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, 18 ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
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 dear 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 purchaser) holds the original sate 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, 19 ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
the notices dated August 2, 2013, issued under section 153C of the said Act are quashed. Accordingly all proceedings pursuant thereto stand quashed.
18. The writ petitions are allowed as above. There shall be no orders as to costs.
19. All pending applications also stand disposed of."
2.6. The Hon'ble jurisdictional High Court in the judgements referred above have defined principles which premise the operation of section 153C of the Act. In the present appeal, the facts are that there was a search at the premises of M/s Chahat Infrastructure (P) Ltd. 201 Starlit Tower, Y.N. Road, Opposite to Head Office of State Bank Of Indore, Indore (M.P.). Pursuant to the search ACIT, Circle-2, Gwalior in the satisfaction note records that certain incriminating documents (LPS-2 & LPS-6) were found and seized at the premises and he therefore was satisfied that some documents/papers belongs to M/s Prabhatam Developers, and hence, the concerned AO is intimated to take necessary action u/s 153C/148 of the Act for verification of the same.
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ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
2.7. It is evident that in the first instance, no clear satisfaction for assumption of jurisdiction u/s 153C of the Act is recorded in the note as it is stated that action may be taken u/s 153/148 of the Act for verification of the documents. The AO of the searched person has not held that the person searched have disclaimed the ownership of the said papers found from their premises. The jurisdictional High Court in the case of Pepsi Foods (P) Ltd. vs. ACIT (supra) has held that in respect of any document found from the premises of the searched person, it is for the AO of the searched person to rebut the presumption and come to a conclusion or satisfaction that the documents belongs to somebody else. Further, there must be cogent material available with the AO before arriving at the satisfaction that the seized documents does not belong to the searched person but to somebody else. It is noted from the satisfaction note that no material has been brought out or recorded to show that the AO of the searched person was satisfied that the seized documents do not belong to the searched person so as to rebut the presumption u/s 292C of the Act. A simple observation that some documents/papers belong to the appellant company does not satisfy the precondition provided u/s 153C of the Act as observed 21 ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
in the judgements of the Hon'ble Delhi High Court referred above. It is also seen that the documents/papers stated to be belonging to the appellant have also not been identified. It is relevant to mention here that CBDT vide letter dated 31.03.2014 had issued guidelines regarding provisions of section 153C of the Act in which it has been provided that due diligence must be observed by AO of the searched person while recording satisfaction in cases where documents found and seized during the search belongs to any other person.
2.8. The AO has referred to documents/papers in LPS-4 & LPS-6 in the assessment order. It is seen that the aforesaid documents are either ledger accounts of the Group companies of the person searched or of the appellant in the books of M/s K. S. City (P) Ltd or hand written sheets or computerized tabulation sheets which cannot be said to be papers belonging to the appellant. Thus, it is not a case where the AO of the searched person has been able to demonstrate that any papers belonging to the appellant were seized as a result of search on M/s. Chahat Infrastructure (P) Ltd. Mere fact that papers are pertaining or relating does not confer jurisdiction.
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ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
2.9. In the assessment order the A.O. has also held that documents only related to the appellant were found and seized in the search. Relevant portion of the assessment order is reproduced as under :
3.1. During the course of search at the office premises of M/s K.S City P. Ltd. and M/s Jagannath Impex P. Ltd. at 201, Starlit Tower, Y.N. Road, Indore, a document LPS-6 was seized out of which page no. 1 is related to the assessee. This document is a letter written by Shri Ashish Gupta, Director, M/s K.S. City P. Ltd. to his father-in-law Shri Ramesh Chand Garg, Chairman, M/s. K.S. Oil Group, in which he has described the land acquisition and development deals that have taken place between the assessee company and M/s K.S. City P Ltd for land at Bypass Road, Indore, Khandwa Road and Pithampura. This letter has been faxed to Shri Ramesh Chand Garg at the Morena office on 29.05.2009 as mentioned on overleaf of this page. This letter describes the transactions of land acquisition/development at Bypass Road @ Rs.47.50 lakhs per acre. In 23 ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
this deal, the shares of the assessee company is shown at 10% and M/s K.S. City Pvt. Ltd. of 90% each respectively.
..... ...... ........
3.3. During the course of search in the office of Shri Sanjay Agarwal, MD of M/s K. S. Oils Ltd., a document LPS-4 was seized out of which page no. 69 & 70 are related to the assessee. This is chart of land acquired/registered in the various companies of M/s K. S. City Group. This chart shows that total land acquired by M/s K.S. Group at Bypass Road of Rs.40,41,90,035/- of 272.92 acres. As against this, the actual cost of land mentioned in the letter at page No.1, LPS-6 above is Rs. 12,29,63,70,000/- @ Rs.47.50 lakhs per acre." 2.10. The AO has proceeded to make addition on the basis of page 1 of document LPS-6 and page 69 & 70 of LPS-4 seized during the search on M/s K.S. Oil Group. The AO has stated that the document is a letter written by Shri Ashish Gupta, Director, M/s K. S. City (P) Ltd. to his father-in-law Shri Ramesh Chand Garg, Chairman, M/s. K. S. Oil Group whereas page 69 & 70 found at premises of M/s K. S. City which is a chart of property snowing area of land acquired and their value registered 24 ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
in the name of various companies and group. The AO has stated that the impugned documents are related to the appellant. Since these documents/papers are not belonging to the appellant, a condition precedent assumption of jurisdiction u/s 153C is not satisfied in the case of the appellant.
2.11. In the case of CIT vs. RRJ Securities Ltd. 380 ITR 612, the Hon'ble Delhi High Court has held that u/s 153C of the assessment or re-assessment of income of a person other than a searched person would proceed in accordance with the provisions of section 153A of the Act and the concluded assessment cannot be interfered with u/s 153C of the Act unless the incriminating material belong to such other person has been seized. In the case of the appellant it is quite evident that no incriminating material belonging to the appellant has been seized. 2.12. In view of the ratio laid down in the decisions of the Hon'ble High Court of Delhi in the case of Pepsico India Holding (P) Ltd. (supra) and Pepsi Foods (P) Ltd. (supra), the satisfaction of the AO that some documents belonging to the appellant is found to be not in accordance with law and as such the notice issued u/s 153C is held as not valid and the consequent assessment framed u/s 153A/143(3) being legally unsustainable, 25 ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
stands quashed. These grounds of appeal are ruled in favour of the appellant."
9. The Ld. D.R. relied upon the order of the A.O. and submitted that proceedings under section 153C cannot be invalidated merely because the A.O. of the searched person was also that of the assessee, did not record a separate satisfaction. The Ld. CIT(A) cannot declare the satisfaction as invalid on hyper technical ground of incorrect terminology used in note. The Ld. D.R. relied upon the following decisions :
1. PCIT vs. Sheetal International Pvt. Ltd., (2017-TIOL-1355-HC-
DEL-IT.
2. PCIT vs. Instronics Ltd., (2017) 82 taxmann.com 357 (Del.)
3. Ganpati Fincap Services (P) Ltd., vs. CIT (2017) 82 taxmann.com 408 (Del.)
4. PCIT vs. Super Malls Pvt. Ltd., (2016) 76 taxmann.com 267 (Del.)/(2017) 393 ITR 557 (Del.)
5. PCIT vs. M/s. Nau Nidh Overseas Pvt. Ltd., (ITA.No.58/2017).
6. Kamleshbhai Dharmsibhai Patel vs. CIT (2013) 31 taxmann.com 50 (Guij.)
7. Rajesh Sunderdas Vaswani vs. ACIT (2016) 76 taxmann.com 311
8. SSP Aviation Ltd., vs. DCIT 20 taxmann.com 214
9. CIT vs. Classic Enterprises 35 taxmann.com 244/358 ITR
465. 26 ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
10. On the other hand, Learned Counsel for the Assessee reiterated the submissions made before the authorities below. He has referred to PB-168 and 169 which is satisfaction note recorded under section 153C of the Act and letter of the A.O. of the person searched which is reproduced in the findings of the Ld. CIT(A). PB 170 and 171 are the copies of the seized documents referred to by the A.O. in the assessment order. He has relied upon the decision of the Hon'ble Delhi High Court in the case of Pepsi Food Pvt. Ltd., vs. ACIT (2014) 367 ITR 112 (Del.) in which it was held as under :
"Mere use or mention of word "satisfaction" or the words "I am satisfied" in order or note would not meet the requirement of the concept of satisfaction as used in Section 153C, satisfaction note itself must display reasons or basis for conclusion that A.O. of searched person was satisfied that the seized documents belong to a person other than searched person in this regard.27
ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
10.1. He has submitted that the judgment of the Delhi High Court has been confirmed by the Hon'ble Supreme Court in the case of ACIT vs. Pepsi Foods Pvt. Ltd., 89 taxman.com 10 in which it was held that "A.O. is required to arrive at a conclusive satisfaction that documents belongs to the person other than searched person." He has submitted that A.O. in the assessment order has mentioned that the seized documents "relating" to the assessee. The A.O. did not giving any finding of fact that the seized documents belongs to the assessee as per requirement of Section 153C of the I.T. Act. He has also relied upon the decision of the Hon'ble Delhi High Court in the case of Pr. CIT vs. Index Securities Pvt. Ltd., and others 157 DTR 20 in which it was held that "in order to justify assumption of jurisdiction under section 153C, documents seized must be incriminating material and must relate to each of the assessment year whose assessments were sought to be reopened." He has submitted that the seized documents were not recovered from the possession of assessee and nothing was found that same were under the handwriting of the assessee. No corroborative 28 ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
evidence was found. Therefore, the Ld. CIT(A) correctly quashed the initiation of proceedings under section 153C of the Act.
11. We have considered the rival contentions and material available on record. The Hon'ble Bombay High Court in the case of CIT vs. Sinhgad Technical Education Society (2015) 378 ITR 84 (Bom.) held as under :
In terms of section 153C of the Income-tax Act, 1961, the Assessing Officer should be satisfied that any money, bullion, jewellery or other valuable articles or thing or books of account or documents seized or requisitioned belong or belongs to a person other than the person referred to in section 153 A of the Act and he can hand over the seized documents to the Assessing Officer having jurisdiction over that person.
The assessee was an educational institution since the assessment year 1994-95. A search and seizure operation was carried out and certain loose papers were seized from the president of the assessee. Simultaneously a survey action was conducted on the assessee. On the basis of loose papers found with and seized from the president the Assessing Officer issued a notice under section 29 ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
153C on the assessee and assessed the income. The Tribunal set aside the assessments. On appeals to the High Court:
Held, dismissing the appeals, that the reasons assigned by the Assessing Officer in the satisfaction note were silent about the assessment year in which specific incriminating information or unaccounted or undisclosed hidden information was discovered or seized by the Revenue from the assessee. In the circumstances, the general satisfaction and as recorded in the note was not enough. There was absolutely nothing to indicate as to in which educational courses, the education was imparted and institution-wise, whether the admissions were granted to the technical courses merit-wise or on the basis of marks obtained in XII standard HSC exam. Whether any fee structure was approved and cash component was, therefore, collected over and above the sanctioned fees were matters which ought to have been gone into and there could not be a general or vague satisfaction. The Tribunal was justified in setting aside the assessments."30
ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
11.1. This decision has been confirmed by the Hon'ble Supreme Court in the case of CIT vs. Singhad Technical Education Society (2017) 397 ITR 344 (SC) in which it was held as under :
"Held, dismissing the appeals, (i) that the Tribunal permitted the assessee to raise the additional ground on the ground that it was a jurisdictional issue taken up on the basis of facts already on record, that under section 153C of the Act, incriminating material which was seized had to pertain to the assessment years in question, and that the documents which were seized did not establish any co-relation, document-wise, with these four assessment years. The Tribunal found that the material disclosed in the satisfaction note belonged to assessment year 2004-05 or thereafter. The Tribunal rightly permitted this additional ground to be raised and correctly dealt with the ground on the 31 ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
merits as well. The High Court was right in affirming this view of the Tribunal.
Decision of the Bombay High Court in CIT v. Sinhgad Technical Education Society [2015] 378 ITR 84 (Bom) affirmed.
(ii) That the assessment order passed by the Assessing Officer covered eight assessment years. For six assessment years the assessment was under
section 153C of the Act. The assessment order was set aside only in respect of four of those assessment years and on a technical ground. The objection pertaining to the four assessment years in question did not relate to the other tax assessment years, namely, 2004-05 and 2005-06. Nor did this decision have a bearing in respect of assessment for assessment year 1999- 2000 or assessment year 2006-07. The necessary consequence would be that the conclusions of the Assessing Officer in his assessment order regarding 32 ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
the activities of the trust not being genuine and not carried out in accordance with the trust deed or cancellation of registration, denial of benefits of sections 11 and 12 would not be affected by this judgment."
12. The Hon'ble Gujarat High Court in the case of Vijaybhai N. Chandrani vs. ACIT (2011) 333 ITR 436 (Guj.) held as under:
"Sections 153A, 153B and 153C of the Income-tax Act, 1961, lay down a scheme for assessment in case of search and requisition. Section 153C which is similarly worded to section 158BD of the Act, provides that where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A he shall proceed against each such other person and issue such other 33 ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
person notice and assess or reassess income of such other person. However, there is a distinction between the two provisions inasmuch as under section 153C notice can be issued only where the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong to such other person, whereas under section 158BD if the Assessing Officer was satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or assets were requisitioned under section 132A, he could proceed against such other person under section 158BC. Thus a condition precedent for issuing notice under section 153C and assessing or reassessing income of such other person, is that the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned should belong to such person. If the 34 ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
requirement is not satisfied, recourse cannot be had to the provisions of section 153C.
Held, allowing the petition, that admittedly, the three loose papers recovered during the search proceedings did not belong to the petitioner. It was not the case of the Revenue that the three documents were in the handwriting of the petitioner. In the circumstances, when the condition precedent for issuance of notice was not fulfilled action taken under section 153C of the Act stood vitiated."
13. The Hon'ble Bombay High Court in the case of CIT vs. Lavanya Land Pvt. Ltd., (2017) 397 ITR 246 (Bom.) held as under :
"It is clear that before issuing notice under section 153C of the Income-tax Act, 1961, the primary condition that has to be fulfilled is that the money, bullion, documents, etc., seized should belong to such other person. If this condition 35 ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
is not satisfied, no proceedings could be taken under section 153C.
The JC group was a partner in the Mumbai Special Economic Zone and Navi Mumbai Special Economic Zone projects of India. This group had floated various companies to purchase large chunks of land in the vicinity of the special economic zones. The group's real estate operations were being handled by V, G and D. D was also the managing land transactions outside the Mumbai Special Economic Zone. The assessee was one of the companies floated by this group to purchase land outside the Mumbai Special Economic Zone. During search of D's residence, certain incriminating documents were seized and his statement was recorded. A show cause notice was issued to the assessee informing it that Rs. 38.45 crores, which was a sum reflected from the documents seized from D's residence and Rs. 4 crores in addition, which was evidenced by loose documents in the form of cash receipts, were found during search and seizure proceedings. The assessee was called upon to explain and show cause why these amounts should not be treated as unexplained expenditure under section 69C of the Act, since the assessee did not provide any explanation with regard to the documents seized under section 132 of the Act for the assessment years from 2003 to 2009 and 2009-10. The assessment order was passed and the additions were 36 ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
made. The unexplained expenditure was apportioned to all the land companies floated by the JC- group. The Tribunal held that an entry in the hooks of account maintained in the regular course of business is relevant for the purpose of considering the nature and impact of a transaction, but notings on slips of paper or loose sheets of paper were required to be supported or corroborated by other evidence. There was a distinction between loose papers found from the possession of the assessee and similar documents found from a third person. The documents were not found from the possession of the assessee but from the possession of a third person i.e., D. Mere mention of the names of the villages where the companies might have purchased lands would not give any basis to assume, presume or surmise that the names of the companies were mentioned in the documents. The Tribunal set aside the order of the Commissioner (Appeals) pertaining to the assessment year 2008-09 holding that the action under section 153C of the Act was bad in law. On appeal :
Held, dismissing the appeal, that the finding that section 153C was not attracted and its invocation was bad in law was not based just on interpretation of section 153C but after holding that the ingredients thereof were not satisfied in the present case. That was an exercise carried out by the Tribunal as the last fact finding authority.37
ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
Therefore, the finding was a mixed one. There was no substantial question of law arising from such an order which alternatively considered the merits of the case as well. The deletion of the addition was justified."
14. The A.O. on the basis of satisfaction note recorded by the A.O. of the searched person proceeded to assume jurisdiction under section 153C of the I.T. Act. Copy of the satisfaction note is filed in the paper book which is also reproduced in the findings of the Ld. CIT(A) above. In the satisfaction note, the seized documents. LPS-2 and LPS-6 referred. The A.O. of the person searched intimated this fact to the concerned A.O. to take necessary action under sections 153C/148 for verification of the same. It is, therefore, clear that A.O. of the searched person was not satisfied, whether it is incriminating in nature against the assessee or the seized documents belong to the assessee. He was not sure as to whether A.O. of the assessee should proceed under section 153C or for Section 148 of the I.T. Act. He just wanted that the proceeding may be initiated for verification of the seized documents. The A.O. while referring to the seized paper in the 38 ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
assessment order has mentioned that the document LPS-6, page-1 found during the course of search in the case of K.S. City Pvt. Ltd., is related to the assessee. The A.O. did not refer that the seized documents belongs to the assessee. Such document was a letter written by Shri Ashish Gupta, Director of K.S. City Pvt. Ltd., to his father-in-law Shri Ramesh Chand Garg, Chairman of K.S. Oil Group regarding acquisition and development of some land with the assessee company. This document did not reveal anything. Therefore, mere mention of the name of the assessee was not sufficient to satisfy the A.O. of the searched person that this document belong to the assessee. This seized paper was not found from the possession of the assessee and did not contain that it was in the hand writing of the assessee. The assessee had denied to have entered into any such transaction either with M/s. K.S. City Pvt. Ltd., or M/s. K.S. Oil group of cases. Regarding another seized paper LPS-4, pages 69 and 70 which is a chart of land acquired/registered in various companies of M/s. K.S. City Group, it is regarding cost of some property and ledger to which 39 ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
also assessee denied to have any connection. The assessee explained that the same did not belong to the assessee and no transaction have been carried out. It may be some internal projection / calculation of K.S. City Group of cases. No evidence or documents were found to prove any on-money payment outside the books of account. None of the documents were having signature or acknowledgment from the side of the assessee. The assessee thus, denied having any connection with the seized paper. These facts, therefore, makes it clear that none of the documents were incriminating in nature so as to put any liability upon assessee. No corroborative evidence was found to link the assessee with these seized papers. The documents were not having any connection between the assessee or the person searched. No expenditure have been incurred by the assessee. These documents were not issued by the assessee. Therefore, the same did not belong to the assessee company. The satisfaction note did not disclose any reasons or basis for the conclusion that the A.O. of the searched person is satisfied that the seized documents belong to the person other than the 40 ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
person searched. Mere recovery of some documents from third person would not bind the assessee or to prove that these same have been owned by the assessee. The A.O. in the assessment order did not say that the documents belongs to the assessee. It is, therefore, evident that no clear satisfaction for assumption of jurisdiction under section 153C of the Act has been recorded in the note so as to take any action against the assessee. The A.O. recorded vague satisfaction to take action against the assessee under section 148 for verification of the documents. The A.O. of the searched person has not recorded that a person searched have disclaimed the ownership of the said papers found from their person/premises. Further, no findings and material is available on record (satisfaction) that the seized documents does not belong to the searched person but to somebody else. LPS-4 and LPs-6 referred in the assessment order are ledger accounts of group companies of the person searched in the books of M/s. K.S. City Pvt. Ltd., and handwritten sheet, which cannot be said to be the papers belonging to the assessee company. Thus, it is not a case where 41 ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
searched person has been able to demonstrate that the papers belonging to the assessee were seized as a result of search. Since the seized documents are not belonging to the assessee, the conditions for assuming jurisdiction under section 153C is not satisfied in this case. It is quite evident that no incriminating material belonging to the assessee has been seized. The A.O. in the satisfaction note did not mention about the assessment year in which specific incriminating material, information or unaccounted or undisclosed hidden information was discovered or seized by the Revenue for the assessee. Therefore, primary conditions of Section 153C of the I.T. Act have not been satisfied in this case. Since, no incriminating material was recovered during the course of search which may belong to the assessee, the Ld. CIT(A) was justified in quashing the assessment in the matter. The decisions of Hon'ble Delhi High Court in the case of Pepsi Foods Pvt. Ltd., and Pepsi Co. India Holding Pvt. Ltd., (supra), squarely apply to the facts of the case. The decisions relied upon by the Ld. D.R. are clearly distinguishable on facts. Considering the above discussion in 42 ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
the light of various decisions referred to above, we do not find any infirmity in the order of the Ld. CIT(A) in quashing the proceedings under section 153C of the I.T. Act. No interference is called for in the matter. We, accordingly, dismiss all the departmental appeals.
15. In the result, all the Departmental Appeals are dismissed and Cross-Objections of the Assessee are dismissed as withdrawn.
Order pronounced in the open Court.
Sd/- Sd/-
(L.P. SAHU) (BHAVNESH SAINI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Delhi, Dated 09th February, 2018
VBP/-
Copy to
1. The appellant
2. The respondent
3. CIT(A) concerned
4. CIT concerned
5. D.R. ITAT 'F' Bench, Delhi
6. Guard File.
43
ITA.Nos.4307, 4308 & 4309/Del./2016 and C.O.Nos.2, 3 & 4/Del./2017 M/s. Prabhatam Developers Ltd., New Delhi.
// BY Order // Assessment. Registrar : ITAT Delhi Benches :
Delhi.