Income Tax Appellate Tribunal - Pune
Dr. D.Y. Patil Pratishtan,, Pune vs Assessee on 30 August, 2012
1
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
Before Shri Shailendra Kumar Yadav, Judicial Member
and Shri R.K. Panda, Accountant Member
Sl. ITA No. A.Y. Name of the Appellant Respondent
No.
1 ITA No. 1586/PN/2011 2000-01 Dr. D.Y. Patil Pratishtan DCIT, Central Circle,
Sant Tukaram Nagar, Kolhapur
2 ITA No.1587/PN/2011 2001-02 Pimpri, Pune-411 018
3 ITA No.1588/PN/2011 2002-03 PAN No. AAATD 5311R
4 ITA No.1589/PN/2011 2003-04
5 ITA No.1590/PN/2011 2004-05
6 ITA No.1591/PN/2011 2005-06
7 ITA No. 1606/PN/2011 2000-01 DCIT, Central Circle, Dr. D.Y. Patil Pratishtan
Kolhapur 869-E, Kasaba Bawada,
8 ITA No. 1607/PN/2011 2001-02 Kolhapur
9 ITA No. 1608/PN/2011 2002-03 PAN No. AAATD 5311R
10 ITA No. 1609/PN/2011 2003-04
11 ITA No. 1610/PN/2011 2004-05
12 ITA No. 1611/PN/2011 2005-06
Assessee by : Sri Sunil Pathak & Sri Nikhil Pathak
Department by : Sri S.K. Singh
Date of Hearing : 30-08-2012
Date of Pronouncement : 07-09-2012
ORDER
PER BENCH :
These are cross appeals and are directed against the separate orders dated 05-09-2008 of the CIT(A), Central, Pune relating to assessment years 2000-01 to 2005-06 respectively. Since common grounds have been taken by the assessee and revenue in all these appeals, therefore, these were heard together and are being disposed of by this common order.ITA No. 1586/PN/2011 (A.Y. 2000-01) (By Assessee) : ITA No. 1606/PN/2011 (A.Y. 2000-01) (By Revenue) :
2. The assessee is a charitable trust and running various educational institutions. It came into existence on 27-12-1990 and was granted registration u/s.12A of the Income Tax Act from the CIT, Kolhapur on 25-11-1991. The assessee is engaged in running of educational institutions. A search and seizure action u/s.132 of the Income Tax Act was conducted on 20-07-2005 in the case of 2 Dr. D.Y. Patil group. The assessee being one of this group was covered u/s.133A of the Income Tax Act, 1961. On the basis of the seized/impounded documents during the course of search/survey and the enquiries conducted later on it was concluded by CIT, Central, Pune vide order dated 30-11-2007 that the activities of the trust are neither genuine nor are being carried out in accordance with the objects of the trust. The CIT, Central, Pune, therefore, for the various reasons mentioned in his order cancelled the registration of the assessee u/s.12AA (3) of the Income Tax Act, 1961. However, the ITAT vide ITA No. 182/PN/2008 order dated 28-11-2008 restored the registration u/s.12A of the Income Tax Act. Nothing contrary was brought to our notice against the order of the Tribunal restoring the registration u/s.12A of the Income Tax Act.
3. On the basis of various documents pertaining to the assessee trust found & seized during the search in case of the trustees the AO issued notice u/s.153C for the A.Y. 2000-01 to 2005-06 on 18-01-2007. It may be mentioned that no search has taken place in case of the assessee Trust. The satisfaction note of the AO reads as under :
Search and seizure action u/s.132 of the Act was conducted in the cases of Dr.D.Y.Patil Group at Kolhapur and Pune on 20-07-2005 at the various residential as well as business premises. This group basically run various educational institutions in the garb of the business.
During the course of search at the office premises of Shri Satej D. Patil at 2126, E Ward, Tarabai Park, Kolhapur books of accounts and loose documents were found and seized as per Annexure 'A' to Panchanama. On verification of these seized material, it is noticed that following documents pertain to Dr. D.Y. Patil Pratishthan, Kolhapur :
i. Page No. 7 of item No. 12 of Annexure'A' to the Panchanama made at above premises is a Xerox copy of balance certificate of D.Y. Patil Pratishthan, Kolhapur (A/c No. 333) given by Rajarambapu Sahakari Bank Ltd., Peth, Shahpuri Branch Kolhapur dt. 03-12-2001 showing balance of Rs. 18,25,687/- as on 03-09-2001.
ii. Pages 8 to 11 of Item No. 12 are copy of account extract of A/c. No.333 of D.Y. Patil Pratishthan, Kolhapur held in Rajarambapu Sah. Bank Ltd., Peth, Shahpuri Branch, Kolhapur for the period from 01-09-2001 to 07-12-2001 showing balance as on 07-12-2001 of Rs. 3,82,832/-.
iii. Item No. 20 of Annexure 'A' to the Panchanama is a file containing papers related to the construction work of Dr. D.Y. Patil Pratishthan.3
iv. Item No. 57, Page No. 16 to 20 are receipts against the payment to matured fixed deposit amounts to Dr. D.Y. Patil Education Society and Dr. D.Y. Patil Pratishthan by Padmashree Dr. D.Y. Patil Nagari Sah. Pat Sanstha Ltd.
Further, during the search and seizure action at residential premises of Shri D.Y. Patil, Shri Sanjay D. Patil and Shri Satej D. Patil at Flat No. 10, Gulmohar Palace, B Lane, North Main Road, Koregaon Park, Pune-1, following documents/books were seized pertaining to Dr. D.Y. Patil Pratishthan, Kolhapur.
i. Item No. 1 of Annexure 'A' to the Panchanama made at above premises is a file containing some loose papers pertaining to Dr. D.Y Patil Pratishthan.
ii. Page Nos.9 and 10 in this file are copy of Demand Drafts No. 331957 & 331958 dated 12-09-2001 drawn in favour of Dr. D.Y. Patil Pratishthan amounting to Rs. 1,00,000/- & Rs. 9,00,000/- respectively.
iii. Page Nos. 11 & 14 are copies of debit vouchers dated 12-09-2001 of Dr. D.Y. Patil Pratishthan C/o. D.Y. Patil College of Engineering, Pimpri, Pune - 411018 connected with the D.Ds at Pages 9 & 10. Amount has been paid to the Karad Janata Sahakari Bank Ltd., Karad payable at Mumbai. The amount has been paid vide cheque No. 449705 through A/c No. 50/779 of Rupee Co-op Bank Ltd., Chinchwad Branch, Pune.
iv. Page 16 is an order registration form No.153 dated 11-08-2001 through which Padmashree Dr. D.Y. Patil Pratishthan, C/o. Padmashree Dr. D.Y. Patil Nisargopchan Kendra, Yawat, Pune has given order for purchase of generator set to Cube Power Care Pvt. Ltd., 74/B, Muktangan Commercial Complex, Sahakar Nagar No.2, Pune-9, costing Rs. 1,08,500/-.
v. Page 18 is a copy of A/c payee cheque No. 449719 dated 01-10-2001 of A/c. No.50/779 of Rupee C-op Bank Ltd., Chinchwad Branch, Pune, drawn in favour of Cube Power Care Pvt. Ltd., by Dr. D.Y. Patil Pratishthan amounting to Rs. 2,45,000/-.
vi. Pages 24A is a copy of letter dt. 01-07-2001 from the Karad Janta Sahakari Bank Ltd., Karad, Mumbai Branch to Dr. D.Y. Patil Pratishthan, Mumbai & Pune intimating for payment of outstanding interest on loan taken vide hire purchase loan A/c. No. 98. The interest upto 30-06-2002 is Rs. 74,256/-.
vii. Page No. 25 is a copy of A/c Payee Cheque No. 897733 dated 20-07-2002 drawn in favour of Dr. D.Y. Patil Pratishthan A/c. The Karad Janata Sah. Bank Ltd., Mumbai amounting to Rs. 10,74,256/-. The cheque is drawn through A/c, No.200/2003 of Andhra Bank, Pimpri Chinchwad Branch, Pune-18.
viii. Page No.26 is a letter dt. 01-07-2002 from Dr. D.Y. Patil Pratishthan, C/o, Dr. D.Y. Patil College of Engg. Pimpri, Pune-18 to the Manager. The Karad Janata Sah. Bank Ltd. Mumbai enclosing cheque at Page No.25. The loan taken was of Rs. 10 lacs and the interest is of Rs. 74,256/-.
ix. Page No. 32 is a receipt No. 2100513 dated 22-11-2001 of Concorde Motors Ltd., 46/9, Vadgaon Sher, Kharadi Road, Off Pune Nagar Road, Pune-14 for the payment of Rs. 22,812/- received from Dr. D.Y. Patil Pratishthan against invoice No. 2100322 & 2100424.
x. Page 33 is a copy of A/c. Payee Cheque No. 528228 dated 22-07-2002 amounting to Rs. 86,662.87 drawn in favour of Millenium Motors Pvt. Ltd., by Dr. D.Y. Patil Pratishthan from A/c. No.10555 of the united Western Bank Ltd., Prabhadevi Br. Mumbai.
Item No. 2 of Annexure 'A' to the Panchanama made at the residential premises of this group at Pune is a file containing 27 papers connected with the purchase of property at Flat No. G-2, Fulmohar Palace Co-op Hst. Society Ltd. Koregoan Park, Pune for a 4 consideration of Rs. 12,50,000/- by Dr. D.Y. Patil Pratishthan vide deed of conveyance dated 08-03-2001.
Item No. 3 of Annexure 'A' to the Panchanama is a file connected with the use of Chartered flight by Shri P.D. Patil, Director and Trustee of Dr. D.Y. Patil Pratishthan. As per the file, Dr. D.Y. Patil Pratishthan has given an advance of Rs. 20 lacs prior to 31-01-2003 and of Rs. 15 lacs prior to 30-11-2003. The bills have been adjusted from these advances.
Item No. 5 of Annexure 'A' to the Panchanama is a file containing papers related to purchase of property by Dr. D.Y. Patil Pratishthan vide deed of assignment dated 30-09- 2000 in respect of property at Flat No. 8, Gulmohar Palace Co-op Hsg. Society Ltd., Koregaon Park, Pune, Area -87 Sq. mtrs. Consideration - Rs. 16,50,000/- and furniture - Rs. 4,25,000/-.
Item No. 6 of Annexure 'A' to the Panchanama is a loose paper bundle containing following papers related to Dr. D.Y.Patil Pratishthan :
Page 1 & 2 are bills of Roshani Services, d79 C/480A, Koregaon, Park, Pune for the fuel purchased by Dr. D.Y. Patil Pratishthan for its vehicle in the month of Feb., 2004.
Page 5 is a challan cum invoice of Cube Power Care (P) Ltd., dated 1 -08-2001 against the delivery of Generator set to Dr. D.Y.Patil Pratisthan at Gulmohar, Koregaon Park, Pune. Its payment reflected at Page No. 18 of item No. 1 above.
Page No. 6 & 7 are copies of service invoices (Invoice No. P2000473) Vehicle (MH-12-CA-6464) of D.Y. Patil Pratishthan, C/o. D.Y. Patil College of Engg. Pimpri, Pune - 411 018, dt. 23-10-2000 of Rs. 31,542/- & Rs. 846/- respectively.
Page No.15 is a charter bill dated 15-07-2000 of Rs. 30,595/- of Dr. D. Patil Pratishthan, Opp: H.A. Ltd., Pimpri, Pune.
Page 16 is a copy of purchase order dated 13-05-2005 give by Dr. D.Y. Patil Pratishthan's D.Y. Patil College of Engg. Akurdi, Pune, to Swift Industries, Pune for Rs. 78,144/-.
As the above seized documents belong to Dr. D.Y. Patil Pratishthan, Kolhapur, notices under section 153C for A.Ys. 2000-2001 to 2005-06 are required to be issued in this case.
Issue notices under section 153C of the Act for A.Ys. 2000-2001 to 2005-06.
4. The assessee did not file the return of income in response to the notice issued by the AO u/s.153C r.w.s. 153A requiring the assessee to furnish the return of income within 30 days from the receipt of notice. Subsequently, the AO issued notice u/s.142(1) requiring the assessee to file its return of income which was served on the assessee on 16-07-2007. In response to the said notice the assessee filed its return of income in Form No.3A on 08-08-07 declaring total income and agricultural income at NIL. It has been mentioned in the body of the Assessment Order that the assessee did not file audited balance sheet and income and 5 expenditure account along with return of income. Having regard to the nature and complexity of the accounts of the assessee and in the interest of the revenue a proposal was made by the AO for getting the accounts of the assessee trust audited under the provisions of section 142(2A) of the Income Tax Act which was subsequently approved by the CIT, Central, Pune. Rejecting the objections of the assessee for appointment of the special auditor u/s.142(2A) the revenue appointed M/s. KGB & J Associates as the special auditors. After obtaining the audit report from the special auditors and considering the various submissions made by the assessee the AO completed the assessment determining the total income at Rs.4,29,51,970/- by making various additions, the details of which are as under :
Income as per P&L account shown by the assessee -7688529.06 1 Disallowance u/s.37(1)-(C) 2532097.00 2 Payment to persons u/s.40A(2)(b)/13 (1)(3)-(E) 3592081.53 3 Trust Fund - (F) 25828563.00 4 Capital Exp. Dr. To P&L - (G) 7046088.00 5 Late payment of Employee P.F. - (H) 1091396.00 6 Penalty/Fine (I) 233953.00 7 Prior Period Expenses (J) 761063.00 8 20% of Cash Payments 40(A)(3)-(K) 170669.20 9 Late payment of Employer P.F.- (L) 1061015.00 10 Revenue Exp. Not supported by Vouchers -(M) 6431842.54 11 Addition on account of depreciation re-working -(N) 396490.91 12 Interest accrued on F.D. in D.Y. Patil Pat Sanstha -(O) 295240.00 13 Unsecured loans/deposits -(P) 1200000.00 TOTAL INCOME ASSESSED 42951970.12
5. Before CIT(A) apart from challenging the various quantum additions the assessee challenged the issue of notice u/s.153C of the Income Tax Act. It was submitted that the notice issued u/s.153C is not justified since no incriminating material was found pertaining to it. It was explained that the search was carried out on the trustees and no incriminating evidence pertaining to the assessee trust was found. It was submitted that in absence of any incriminating evidence the proceedings initiated u/s.153C are not invalid. It was submitted that the various additions made by the AO has nothing to do with any incriminating material found during the search. It was argued that additions can be made only in respect of the 6 issues wherein some incriminating evidence is found. Accordingly it was argued that the proceedings initiated u/s.153C are illegal and therefore the consequent assessment has to be declared null and void. The relevant submission made by the assessee on this issue vide their letter dated 19-12-2008 and as reproduced by the CIT(A) in his order reads as under :
"3.7 In this assessment, the learned AO has made additions on various grounds which have cropped up as a result of audit/asst. enquiry. They have nothing to do with the material found during the search. For example, the additions on account of treatment of capital receipts as revenue receipts or disallowance of salary payments to the trustees, etc. are not arising out of any evidence found during the search. If that be so, the question of making such additions in this assessment does not arise. Thus, without prejudice to our contention that the assessment is null and void, we submit that the learned AO should have restricted the additions to the extent of documents found at the time of search. She has gone much beyond the information so gathered. The appellant submits that during the search, hardly any incriminating documents were found. Accordingly, it is submitted that in his assessment, the additions if any could be possible only on the basis of these documents and on no other issue. In this context, the appellant relies upon the ITAT decision in the case of LMJ International Ltd. [22 SOT 315 (Kol)] wherein it has been held that only undisclosed income detected as a result of search can be added u/s.153C and not the items of regular assessment".
6. The assessee in its further submission dated 02-05-2011 while challenging the initiation of 153C proceedings submitted as under :
"1] In this case, the learned AO has issued notice u/s.153C for the above asst. years. The notice u/s.153C was issued on the basis of the search carried out on D.Y. Patil Group. It may be noted that survey action u/s.133A was carried out in the case of the assessee. The assessee has raised a ground of appeal in all the above years that the notice issued u/s.153C is bad in law.
2] It is submitted that the notice issued u/s.153FC is bad in law. As per the satisfaction note, the documents found pertaining to the assessee are all recorded in the books and they are not incriminating evidence. We are enclosed herewith to indicate that the various documents found in the course of search are properly recorded in the books. Thus, it is submitted that the notice issued u/s.153C for the above years is not justified at all. In this context, Your Honour's kind attention is invited to section 153C which provides that where any money, bullion, jewellery or valuable article or thing or books of accounts or documents seized belong to a person other than a person referred to section 153A, then the notice u/s.153C can be issued in respect of the other person. Thus, there has to be some concrete evidence found from the person who has been searched. Now, the documents pertaining to the appellant found during the course of search are not incriminating documents and therefore, the notice u/s.153C could not be issued.
3] In this context, Your Honour's kind attention is invited to the recent ITAT, Pune decision in the case of Sinhagad Technical Education Society (copy enclosed). This decision of the Hon'ble ITAT is for A.Y. 2000-01 to 2003-04. The notice u/s.153C was issued for the above years on the basis of certain documents found with Sri M.N. Navale were for A.Y. 2004-05 onwards and no documents were found for A.Y. 2000-01 to 2003-
04. On that basis, it was submitted that no notice could be issued u/s.153C for the earlier years for which no document was found with Shri Navale. Hon'ble ITAT accepted the claim of the assessee that when no specific document was found for A.Ys. 2000-01 to 2003-04 with Shri Navale, the notice u/s.153C cannot be issued for those years. It is 7 further held that notice can be issued only when some incriminating evidence has been found. Accordingly, since no document was found for A.Ys. 200-01 to 2003-04, Hon'ble ITAT allowed the claim and held that the notice u/s.153C issued for those years is invalid.
4] Accordingly, for the above years, the documents found in the course of search are not incriminating documents and therefore, the notice issued u/s.153C on the basis of these documents is also invalid. In this context, the assessee is relying upon following decisions :
a. LMJ International Ltd., ][199 TTJ 214 (Kol)] b. Anilkumar Bhatiya [1 ITR (Trib) 484 (Del)] 5] In view of the above submissions, the appellant submits that the notices issued u/s.153C for the above years are invalid and consequently the assts. made may kindly be declared null and void".
7. However, the learned CIT(A) was not satisfied with the explanation given by the assessee and the various decisions cited before him. He observed that no objection was taken by the assessee during the proceedings initiated by the AO u/s.153C r.w.s.153A of the Income Tax Act subsequent to the search. Therefore, the same cannot be challenged to be invalid in view of the provisions contained in section 292B and 292BB of the Income Tax Act. Even otherwise on merit also he dismissed the ground raised by the assessee and held that provisions of section 153C r.w.s.153A refers to material seized during the search. There is nothing in section153A or 153C which prescribes that incriminating material should be found in the search and seizure operation. He noted that it is an undisputed fact that during the course of search certain documents belonging to the assessee were found at the various premises belonging to the trustees of the assessee firm. Proceedings u/s.153C of the Income Tax Act were initiated in pursuance to recovery of these documents. Therefore, the proceedings u/s.153C of the Income Tax Act were validly initiated in the case of the assessee. As regards the submission of the assessee that notice u/s.153C of the Income Tax Act can be issued only when some incriminating evidence has been found, he observed that section 153C gives mandate to the AO to proceed against the person to whom any money/bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs to other than the person referred to in 8 section 153A of the Income Tax Act. Distinguishing the decision of the Pune Bench of the Tribunal in the case of Sinhagad Technical Education Society and relying on the decision of Chennai Bench of the Tribunal in the case of Harvey Heart Hospitals Ltd. Vs. ACIT reported in 36 DTR 201, the decision of the Bilaspur Bench of the Tribunal in the case of ACIT Vs. Panchuram Deshmukh and Others reported in 40 DTR (Bilaspur) (Trib) 252 (2010)/133 TTJ 53 and the decision of the Hon'ble Gujarat High Court in the case of Vijaybhai N. Chandrani Vs. ACIT reported in 231 CTR 474 (Gujarat) he held that the notice issued by the AO u/s.153C of the Income Tax was valid notice.
8. So far as the various additions made by the AO the learned CIT(A) gave partial relief to the assessee. Aggrieved with such order of the CIT(A) the assessee as well as revenue are in appeal before us with the following grounds :
Grounds by Assessee :
" 1. The learned CIT(A) erred in not appreciating that the asst. u/s.153C passed by the learned AO was null and void.
1.1. The learned CIT(A) erred in holding that the notice issued u/s.153C was valid and there was no requirement that any incriminating evidence was required to be found pertaining to the assessee in order to invoke the provisions of section 153C.
1.2. The learned CIT(A) failed to appreciate that the provisions of section 153C were applicable only when any incriminating evidence pertaining to the assessee was found with the person searched and since in this case, no incriminating evidence pertaining to the assessee trust was found in the course of search, the issue of notice u/s.153C was invalid in law.
2. The learned CIT(A) erred in not appreciating that the reference u/s.142(2A) for special audit was an illegal one as the AO had not given an opportunity of hearing to the assessee as required under proviso to section 142(2A) and consequently, the asst. order passed is barred by limitation.
2.1. The learned CIT(A) further failed to appreciate that the reference to special auditor was invalid in law and therefore, the asst. order passed was time barred.
3. The learned CIT(A) erred in holding that the appellant trust was not entitled to the exemption u/s.11 as it had violated the provisions of sections 11 to 13 and consequently, the income of the appellant was taxable under the normal provisions of the Act.
4. The learned CIT(A) ought to have granted exemption u/s.11 to the appellant trust since the registration u/s.12A was restored by Hon'ble ITAT, Pune and therefore, the appellant was entitled to claim exemption u/s.11.9
5. The learned CIT(A) erred in holding that the appellant trust had violated the provisions of section 13(1)(c) on account of the following payments made by it :
Sr.No. Particulars Amount
(Rs.)
1 Advertisement expenses 3,66,473.00
2 Payment of Membership Fee to Mahindra Holidays 1,52,550.00
3 Payment of Audit Fee to M/s. R.D. Patil & Co. 7,48,000.00
5.1 The learned CIT(A) erred in holding that 50% of the advertisement expenses
resulted in image building of the trustees and thereby the appellant had granted a personal benefit to the trustees resulting in violation of section 13(1)(c).
5.2 The learned CIT(A) failed to appreciate that the advertisement expenditure incurred by the appellant did not result in any benefit to the trustee and the expenditure incurred was in the course of achieving the objects of the appellant and there was no violation of section 13(1)(c).
5.3 The learned CIT(A) erred in holding that the payment made to Mahindra Holidays by the appellant trust resulted in personal benefit to the trustees and hence, the appellant had violated the provisions of section 13(1)(c).
5.4 The learned CIT(A) failed to appreciate that no benefit was given to the trustee on account of payment to Mahindra Holidays and hence, the assessee has not violated the provisions of section 13(10(c).
5.5 The learned CIT(A) further erred in holding that the payment of audit fee to R.D. Patil & Co. Chartered Accountants was excessive and resulted in violation of section 13(1)(c).
5.6 The learned CIT(A) failed to appreciate that the audit fee paid to R.D. Patil & Co. Chartered Accountants was reasonable considering the volume of work and the time spent and hence, there was no reason to hold that the payment made to the said concern was in violation of section 13(1)(c).
6. The learned CIT(A) further erred in holding that the following expenses were not allowable as a deduction while computing the income of the appellant because the appellant had violated the provisions of section 13(1)(c) :
Sr.No. Particulars Amount
(Rs.)
1 Advertisement expenses 3,66,473.00
2 Payment of Membership Fee to Mahindra Holidays 1,52,550.00
3 Payment of Audit Fee to M/s. R.D. Patil & Co. 7,48,000.00
6.1 The learned CIT(A) failed to appreciate that the above expenses were incurred for
the objects of the trust and hence, the same ought to have been allowed while computing the income of the appellant.
7. The learned CIT(A) erred in holding that part of the development fee amounting to Rs. 3,90,529/- collected by the appellant from the students as per the circulars issued by the Govt. was a revenue receipt chargeable to tax.
7.1 The learned CIT(A) failed to appreciate that the entire development fee collected by the assessee from the students as per the circulars issued by the Govt. was a capital receipt and no amount was chargeable as a revenue receipt.10
8. The learned CIT(A) erred in holding that the donations received by the appellant of Rs. 1,82,15,915/- was taxable as income of the appellant without appreciating that the said donations were received towards the corpus of the trust and hence, the same were exempt from tax.
9. The learned CIT(A) erred in disallowing revenue expenditure of Rs. 60,14,975/- on the ground that the said expenses were not supported by proper evidences.
9.1 The learned CIT(A) failed to appreciate that the disallowance of such expenses was not warranted since most of the expenses were paid by cheque and incurred for the objects of the trust,
10. The learned CIT(A) erred in confirming the disallowance of depreciation on the capital expenditure of Rs. 6,47,388/- on the ground that the said capital expenses were not supported by proper evidences.
10.1 The learned CIT(A) failed to appreciate that the disallowance of depreciation in respect of such capital expenses was not warranted since most of the capital expenses were paid by cheque and therefore, the depreciation ought to have been allowed.
11. The learned CIT(A) erred in confirming the following disallowances without appreciating that since the assessee was entitled to claim exemption u/s.11, such disallowances were not warranted while computing the income of the appellant us/.11.
Sr. Particulars Amount
No. (Rs.)
a Disallowance on account of late payment of 1,01,265
employees Provident Fund
b Disallowance on account of late payment of 1,01,265
employer's contribution to Provident Fund
c Penalty/Fine paid 2,33,853
D Disallowance U/s. 40A(3) (20% of cash payments) 1,70,669
e Donation paid 16,46,601
f Capital Expenditure Debited to Income & 68,63,207
Expenditure A/c
12. The learned CIT9A) erred in not setting off the excess deficit in the hands of the appellant till A.Y. 1999-00 against the income of the appellant for this year."
13. The appellant craves leave to add, alter, amend, or delete any of the above grounds of appeal Grounds by Department :
"01 (i) Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) was justified in holding that advancing interest free loan of Rs. 2,17,08,290/- by the assessee to its related concern D.Y. Patil Education Society does not attract provisions of sec. 13(1)(d) of the IT. Act, 1961.
(ii) Without prejudice, CIT(A) erred in not appreciating the fact that D.Y. Patil Education Society is an interested person as per section 13(3) of the Act and therefore, advancing interest free loan of Rs. 2,17,08,290/- by the assessee to D.Y. Patil Education Society is violation of provisions of sec. 13(1)(c).
(iii) CIT(A) erred in not appreciating the fact that even in case wrong provision is invoked, mentioning wrong section, ie. Section 13(10(d) instead of 13(1)(c), is not fatal and it is merely a procedural lapse as held by many judicial authorities including Hon'ble Madras High Court in the case of R.P Kundaswamy & Others Vs. CIT ( 49 ITR 344).11
02 Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) was justified in allowing 50% of the advertisement expenses as expenditure towards objects of the Trust, when the expenses were infact for the image building of the founder Trustee and not for the objects of the Trust, thus squarely in violation of provisions of section 13(1)(c).
03. (i) Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) was justified in deleting the proportionate disallowance of Rs. 53,336/- from out of interest to financial institutions debited by the assessee holding that assessee's own funds are much more than the funds advanced to sister concern without appreciating the fact that assessee's own funds and borrowed funds are part of common pool of funds and assessee's own funds are not in liquid form and are infact locked as investment in building, furniture, working capital etc.,
(ii) CIT(A) failed to appreciate the fact that had the assessee not advanced interest free loans to sister concern, there would have been no need to borrow funds from financial institutions to that extent and accordingly no need to pay interest to that extent.
04. (i) Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) was justified in allowing remuneration paid to relatives of Trustees to the tune of Rs. 22,81,528/- holding that nothing has been brought on record to show that market value of the services/jobs was less than the payments made to them when the payments were squarely covered u/s.40A(2)(b).
(ii) CIT(A) erred in not appreciating the fact that the accounts were subject to special audit u/s.142(2A).
(iii) Without prejudice to the above, Ld. CIT(A) has erred in not exercising his plenary powers which are conterminous with that of Assessing Officer as per the ratio laid down by CIT Vs. Kanpur Coal Syndicate (1964) 53 ITR 225, 229 (SC).
05 (i) Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) was justified in allowing entire amount of Rs. 6,33,018/- on account of telephone and mobile expenses paid to the Trustees at the residence of the trustees without considering the personal use of telephones and mobiles and without appreciating that no evidence was produced before the AO and were covered u/s.40A (2)(b).
(ii) CIT(A) erred in not appreciating that the accounts were subject to special audit u/s.142(2A).
06. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) was justified in allowing development fee of Rs. 1,34,88,113/- as capital receipt ignoring the fact that the same was to be treated as income in view of cancellation of registration u/s.12A and also in view of violation of section 13(1)(c) which automatically rendered the income chargeable to tax.
07. (i) Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) was justified in holding that employees contribution which was not deposited within due date under that Act is allowable as expenditure when the same was rightly disallowed by the Assessing Officer.
(ii) Whether the decision of Ld. CIT(A) ignoring the clear distinction between employee's contribution to ESI, PF and Pension Fund and employer's contribution is bad in law?
(iii) Whether the decision of Ld. CIT(A) ignoring the provisions of section 2(24) (x) r.w.s. 36(1)(va) as per which employee's contribution to ESI, PF and Pension Fund is deductible only if payment is made before the due date as prescribed in the respective Act, Rule, Order or Notification governing such funds is erroneous and contrary to provisions of Income tax Act, 1961?12
(iv) Whether the decision of ITAT ignoring the fact that the amendment to section 43B is applicable only to employer's contribution and not to employee's contribution is bad in law?
(v) Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) was justified in ignoring the decision of Special Bench of Kolkata in the case of JCIT Vs. ITC Lt., reported at 112 ITD 57.
08. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) was justified in deleting the addition u/s.68 of the Act of Rs. 14,90,000/- made by the AO towards advance fee, when the said credits were not satisfactorily explained by the assessee and were squarely covered by Sec. 68 of the Act.
09. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) was justified in allowing maintenance expenses of flats at Gulmohar Society when the said flats were used exclusively by the founder of the Trust violating the provisions of sec. 13(1)(c) of the Act.
10. The Appellant prays that the order of the Ld. CIT(A) be vacated and that of the AOs order may be restored.
11. The appellant craves leave to add, alter, amend, modify any of the above grounds raised, any other grounds at the time of proceedings before the Hon'ble Tribunal which may be granted.
9. The learned counsel for the assessee raised the preliminary issue challenging the validity of notice issued u/s.153C. Referring to the following chart he submitted that each and every entry on the document referred to in the satisfaction note has been properly accounted for. Therefore, it does not constitute any incriminating evidence.
Details of recording in the Books, regarding satisfaction note Sr. Particulars of Documents Relevant Recorded Reference Reply Seized Whether No. FY in Books Paper paper any addition is made on account of the seized paper of the satisfaction note 1 Search and seizure action u/s. 132 of the Act was conducted in the cases of Dr. D.Y. Patil Group, at Kolhapur and Pune on 20-07- 2005 at the various residential as well as business premises. This Group basically run various educational institutions in the garb of the business.
2 2 a) Page No.7 of item NO.12 of 2001-02 YES This seized page no. 7 is a Annexure 2001-02 'A' to the certificate issued by Panchanama made at above Rajarambapu Sahakari Bank premises is a Xerox copy of Ltd., Peth, Shahupuri Branch, balance certificate of D. Y. Patil Kolhapur dt. 03-12-2001 Pratishthan, Kolhapur showing balance of Rs. 1 to 11 1 (A/c.No.333) given by 18,25,687/- as on 03-09- 200 343 to 353 66 of NO Rajarambapu Sahakari Bank Ltd., and pertains to Dr. D. Y. Patil of PB PB Peth, Shahhupuri Branch, Pratishthan, Kolhapur Kolhapur dt. 03-12-2001 showing Division. This account is duly balance of Rs. 18,25,687/- as on recorded in books of accounts 03-09-2001 of Kolhapur Division. The photocopy of ledger extract in 13 the books of Dr. D. Y. Patil Pratishthan, Kolhapur Division and photocopy of bank statement of Rajarambapu Sahakari Bank Ltd. is enclosed at page no.1 to 11.
2 2 b) Pages 8 to 11 of item No. 12 2001-02 YES These seized page no. 8 to 11
are copy of account extract of A/c. are a copy of account extract
No. 333 of D.Y. Patil Pratishthan, of A/C No. 333 with
Kolhapur held in Rajarambapu Rajarambapu Sahakari Bank
Sah. Bank Ltd., Peth, Shahupuri Ltd., Peth,
Branch, Kolhapur for the period Shahupuri Branch, Kolhapur
from 01-09-2001 to 07-12-2001 for the period from 01-09-
showing balance as on 07-12-2001 2001 to 07.012.2001 showing
of Rs. 3,82,832/-. balance as on 7.012.2001 of
Rs. 3,82,832/-. This bank A/C
pertains to Dr. D. Y. Patil 2 to 5
1 to 11
Pratishthan, Kolhapur 1 to 11 67 to
343 to 353 NO
Division. This account is duly 70 of
of PB
recorded in books of accounts PB
of Kolhapur Division. The
photocopy of Bank statement
and photocopy of ledger
extract showing the
transaction of this A/C No.
333 in the books of Dr. D. Y.
Patil Pratishthan, Kolhapur
Division is enclosed at page
no.1 to 11.
4 2 c) Item No. 20 of Annexure 'A' 2000-01 YES This file contains 14 seized
to the Panchanama is a file paper regarding purchase of
containing papers related to the ply and hardware material for
construction work of Dr. D.Y. C- DAC Center at Kolhapur
Patil Pratishthan Division. These purchases are 6 to
duly recorded in books of 12 12 to 13 19
to 13 accounts of Kolhapur 354 to 355 71 to NO
Division. The photocopy of of PB 84 of
ledger extract of Furniture Alc PB
and photocopy of Journal
Register towards recording of
these bills are enclosed at
page no. 12 to 13
5 2 d) Item No. 57, Page No. 16 to 20 2000-01 YES Only page No. 18 pertains to
are receipts against the payment the assessee trust and seized
to matured fixed deposit amounts page no. 16,17,19,& 20
to Dr. D.Y. Patil Pratishthan pertains to Dr. D.Y.Patil
Education Society and Dr. D.Y. Education Society, Kolapur.
Patil pratishthan by Padmashree Which is a separate trust and
Dr. D.Y. Patil nagari Sah. Pat. is not part of our trust. In case
Sanstha Ltd. of seized page no. 18 it reflect
amount of Rs. 10.00 Lacs
received by Padmashree Dr.
D. Y. Patil Nagari Sah. Pat
Sanstha Ltd. against loan
given to Dr. D.Y. Patil
20 to
Pratishthan, Kolhaour
14 to 16 24
Division. This payment of
356 to 358 85 to NO
Rs. 10.00 Lacs is duly
of PB 89 of
recorded in books of accounts
PB
of extract of interest A/c in
the books of Dr. D.Y. Patil
pratishthan, Kolhapur
Division towards payment of
interest amounting to
Rs.1,21,827.85 and
photocopy of ledger extract of
Dr. D.Y. Patil Patsantha A/c.
in the books of Dr. D.Y. Patil
Pratishthan, Kolhapur
Division towards payment of
Rs.8,78,172.15 is enclosed at
Page No. 14 to 16
6 3 Further, during the search and
seizure action at residential
premises of Shri D. Y. Patil, Shri
Sanjay D. Patil and Satej D. Patil
at flat No. 10, Gulmohar Palace,
B Lane, North Main Road,
Koregaon Park, Pune-1 following
documents / books were seized
pertaining to Dr. D. Y. Patil
14
Pratishthan Kolhapur:-
7 a) Item No.1 Annexure 'A' to
the Panchanama made at above
premises, is a file containing
some loose papers pertaining to
Dr. D. Y. Patil Pratishthan -
8 * Page No. 9 and 10 in this file are 2002-03 YES These seized page no. 9 & 10
copy of Demand Drafts No. pertains to Dr. D.Y.Patil
331957 & 331958 dated 12-09- Pratishthan, Pune Division.
2001 drawn in favour of Dr. D.Y. These demand drafts are paid
Patil Pratishthan amounting to Rs. to Karad Janata Sahakari
1,00,000/- & Rs. 9,00,000/- Bank Ltd. towards repayment
respectively. of loan taken by our trust.
These payments are duly
25 to
recorded in the books of
17 to 18 26
accounts of Dr. D. Y 17 to 18
359 to 360 90 to NO
Patil Pratishthan, Pune
of PB 91 of
Division. The photocopy of
PB
ledger extract of Karad Janata
Sah. Bank Ale in the books of
Dr. D. Y. Patil Pratishthan,
Pune Division and Bank
Statement of Karad Janata
Sahakari Bank for the period
01/04/2000 to 05/12/2002 is
enclosed at page no. 17 to 18.
9 * Page No.11 & 14 of are copies of 2001-02 YES These seized page no. 11 &
2001-02 debit voucher dated 12- 14 pertains to Dr. D.Y.Patil
09-2001 of Dr. D. Y Patil Pratishthan, Pune Division.
Pratishthan Clo O. Y. patil This document is photocopy
College of Engineering, Pimpri, of voucher for issue of
Pune-411018 connected with the demand drafts to be paid to
Ds at page 9 & 10. Amount has Karad Janata Sahakari Bank
been paid to the Karad Janata Ltd. towards repayment of
Sahakari Bank Ltd. Karad loan taken by the assessee
payable at Mumbai. The amount trust. This payment is duly 27 to
has been paid vide Cheque No. recorded in the books of 17 to 18 28
449705 through Alc No.50/779 of accounts of Dr. D. 17 to 18 Y. 359 to 360 92 to NO
Rupee Co-op. Bank Ltd., Patil Pratishthan, Pune of PB 93 of
Chinchwad Branch, Pune. Division. The photocopy of PB
ledger extract of Karad Janata
Sah. Bank Ale in the books of
Dr. D. Y. Patil Pratishthan,
Pune Division and Bank
Statement of Karad Janata
Sahakari Bank for the period
01/04/2000 to 05/12/2002 is
enclosed at page no.17 to 18.
10 * Page 16 is an order registration 2001-02 YES This seized document is order
form 2001-02 No.153 dated 11- registration form for purchase
08-2001 through which of generator set. This
Padmashree Dr.D..Y. Patil purchase of generator is duly
Pratishthan C/o. Padmashree Dr. recorded in the books of
D.Y.Patil Nisargopchar Kendra, accounts of Dr. D. Y. Patil
Yawat, Pune has given order for Pratishthan, Pune Division.
19 to 20 29
Purchase of generator set to Cube The photocopy of ledger
361 to 362 94 of NO
Power Care Pvt. Ltd., 74/B, extract of 19 t 20 Generator
of PB PB
Muktangan Commercial A/c appearing in the books of
Complex, Sahakar Nagar No.2, Dr. D. Y. Patil Pratishthan,
Pune9; costing Rs. 1,08,500/-. Pune Division towards
recording of Generator Set
purchased from Cube Power
Care Pvt. Ltd. Is enclosed at
page no. 19 to 20
11 * Page No.18 is a copy of A/c 2001-02 YES This seized document is
payee cheque No. 449719 dated photocopy of cheque no.
01-10-2001 of A/c.No.50/779 of 449719 of Rupee Co-op.
Rupee Co-op. Bank Ltd., Bank Ltd. paid for purchase
Chinchwad Branch, Pune, drawn of generator set. This
in favour of Cube Power Care (P) purchase of generator is duly
Ltd., by Dr. D.Y. Patil recorded in the books of
Pratishthan amounting to Rs. accounts of Dr. D. Y. Patil 19 to 20 30
2,45,000/-. Pratishthan, Pune Division. 361 to 362 95 of NO
The photocopy of ledger of PB PB
extract of 19 to 20 Generator
Ale towards recording of
Generator set purchased from
Cube Power Care Pvt.
Ltd.and ledger extract of
Cube Power Care Pvt. Ltd.
towards payment appearing in
15
the books of
Dr. D. Y. Patil Pratishthan,
Pune Division are enclosed at
page no. 19 & 20
12 * Pages 24A is a copy of letter dt. 2002-03 YES This seized page no. 24A
01-07-2001 from the Karad Janta pertains to Dr. D.Y.Patil
Sahakari bank Ltd., Karad, Pratishthan, Pune - Division.
Mumbai Branch to Dr. D.Y. Patil This document is photocopy
Pratishthan, Mumbai & Pune of intimation for making
intimating for payment of payment of outstanding
outstanding interest on loan taken interest on loan taken from
vide hire purchase loan A/c. No. Karad Janata Sahakari Bank
98. The interest upto 30-06-2002 Ltd. by our trust. The
is Rs. 74,256/-. payment of interest along
with principal is duly 21 to 23 31
recorded in the books of 21 to 363 to 365 96 of NO
23 accounts of Dr. D. Y. Patil of PB PB
Pratishthan, Pune Division.
The photocopy of ledger
extract of Karad Janata Sah.
Bank Alc in the books of Dr.
D. Y. Patil Pratishthan, Pune
Division and Bank Statement
of Karad Janata Sahakari
Bank for the period 01/04/2000
to 05/12/2002 is enclosed at
page no. 21 to 23.
13 * Page No.25 is a copy of a/c Payee 2002-03 YES This seized Page no. 25 is
Cheque No. 897733 dated 20-07- photocopy of cheque no.
2002 drawn in favour of Dr. D.Y. 897733 of Andhra Bank
Patil Pratishthan A/c. The Karad towards payment of interest
Janata Sah. Bank Ltd., Mumbai and principal. This cheque
amounting to Rs.10,74,256/-. pertains to Dr. D.Y.Patil
The cheque is drawn through Pratishthan, Pune Division.
A/cNo. 200/2003 of Andhra The payment of interest along
Bank, Pimpri-Chinchwad Branch with principal is duly
Pune-18. recorded in the books of 21 to 23 32
accounts of Dr. D. Y. 21 to 23 363 to 365 97 of NO
Patil Pratishthan, Pune of PB PB
Division. The photocopy of
ledger extract of Karad Janata
Sah. Bank Alc in the books of
Dr. D. Y. Patil Pratishthan,
Pune Division and Bank
Statement of Karad Janata
Sahakari Bank for the period
01/04/2000 to 05/12/2002 is
enclosed at page no. 21 to 23.
14 * Page No. 26 is a letter dt. 01-07- 2002-03 YES This seized page no. 26 is
2002 from Dr. D.Y. Patil photocopy of letter of Dr. D.
Pratishthan C/o. Dr. D.Y. Patil Y. Patil Pratishthan, Pune
college of Engg. Pimpri, Pune-18 Division regarding payment
to the Manager, The Karad Janata of interest and principal. The
Sah. Bank Ltd., Mumbai payment of interest along
enclosing cheque at Page No.25. with principal is duly The loan taken was Rs. 10 lac and recorded in the books of the interest is of Rs. 74,256/-. accounts of Dr. D. Y. Patil 21 to 23 33 Pratishthan, Pune Division.
363 to 365 98 of NO
The photocopy 21 to 23 of
of PB PB
ledger extract of Karad Janata
Sah. Bank Alc in the books of
Dr. D. Y. Patil Pratishthan,
Pune Division and Bank
Statement of Karad Janata
Sahakari Bank for the period
01/04/2000 to 05/12/2002 is
enclosed at page no. 21 to 23.
15 * Page 32 is a receipt No. 2100513 2001-02 YES This seized paper no. 32 is This page
dated 22-11-2001 of Concorde photocopy of receipt received indicates
Motors Ltd. 46/9, Vadgaon Sher, from Concorde Motors Ltd. repairs
kharadi Road, of Pune Nagar 46/9, Vadgaon Sheri, Kharadi expenditure
Road, Pune-14 for the payment of Road, off Pune-Nagar Road, on
Rs.22,812/- received from D.Y. Pune-14 for the payment of Mercedez
Patil Pratishthan against invoice Rs. 22,8121 received from D. 24 to 34 34 car owned
No. 2100322 & 2100424. Y. Patil Pratishthan against 366 to 376 99 of by the trust.
invoice No. 2100322 & of PB PB The said
2100424. This payment 24 to expenditure
34 of Rs. 22,812/- dated is accounted
22.11.2001 is duly recorded for in the
in the books of account of Dr. books. No
D. Y. Patil Pratishthan, Pune addition has
Division in repairs & been made
16
Maintenance AIC on by the ld.
22.11.2001. The photocopy AO on the
of ledger extract of Repairs & ground as
Maintenance Alc the said
is enclosed at page no. 24 to expenditure
34. is
accounted.
This car is
used for
VIP guests
of the trust.
However,
the AO has
held that
such
expenditure
has resulted
in violation
of the
provision of
section
13(1)(c) on
the ground
that the said
expenditure
resulted in
benefit to
the trustees.
He
presumes
that the car
is used by
the trustee.
The
assessee
submits that
this is a
presumption
of the AO
and the
expenditure
incurred has
been
accounted
for in the
books. The
expenditure
noted
therein is
duly
accounted
and hence, it
cannot be
considered
as an
incriminatin
g evidence
16 * Page 33 is a copy of A/c. Payee 2002-03 YES This seized paper no. 33 is
Cheque No. 528228 dated 22-07- photocopy of cheque no.
2002 amounting to Rs.86,662.87 528228 dated 22.07.2002 of
drawn in favour of Milennium The United Western Bank
Motors Pvt. Ltd. by Dr. D.Y. Patil Ltd. towards making the
Pratishthan from A/c. No.10555 payment of Rs.86,662.87 by
of the United Western Bank Ltd., Dr. D. Y. Patil Pratishthan to
Prabhadevi Br. Mumbai. Millenium Motors Pvt. Ltd.
This payment of Rs.86,662.87
dated 22.07.2002 is duly 35 to 36 35 Same
recorded in the books of 377 to 378 100 of comments
account of Dr. D. Y. Patil 35 of PB PB as above
to 36 photocopy of Ledger
Extract of Repairs &
Maintenance of vehicle Alc
and ledger extract of The
United Western Bank Alc no.
10555 appearing in the Books
of Dr. D. Y. Patil Pratishthan
are enclosed at page no. 35 to
36.
17 3 b) Item No. 2 of Annexure 'A' to 2000-01 YES The assessee trust has The cost of
36
the Panchanama made at the purchased the Flat No. G-2 at 37 to 38 the flat has
101 to
residential premises of this group Gulmohar Palace Co-op. 379 to 380 been
132 of
at Pune is a file containing 27 Housing Society, Koregaon of PB recorded in
PB
papers connected with the Park, Pune and the the books
17
purchase of property at Flat No. consideration paid of Rs. and no
G-2, Gulmohar Palace Co-op. 12.50 Lacs is duly accounted addition has
Hst. Society Ltd., Koregoan Park, in the books of Dr. D. Y. Patil been made
Pune for a consideration of Rs. 37 to 38 36 Pratlshthan. The by the AO
12,50,000/- by Dr. D.Y. Patil payment of Rs.50,0001- was on account
Pratishthan vide deed of made on 13.02.2001 and of the cost.
conveyance dated 08-03-2011 payment of Rs.12,00,0001- is However,
made on 08.03.2001. Copy of the AO has
ledger account extract is presumed
enclosed at page no. 37 to 38. that the said
flat is used
for the
personal
purpose of
the trustees
and
disallowed
the
maintenance
and
depreciation
expenditure
related to
the said flat.
It is
submitted
that the flat
is used as a
guest house
and the
trustee, Dr.
D.Y. Patil,
also stays
there
whenever he
visits pune.
There is no
question of
disallowing
the
expenditure
and
depreciation
. The
expenditure
noted
therein is
duly
accounted
and hence, it
cannot be
considered
as an
incriminatin
g evidence
18 3 c) Item No. 3 of Annexure 'A' to 2002-03 YES This seized file is regarding
the Panchanama is a file and 2003- the use of chartered flight by The
connected with the use of 04 Dr. D. Y. Patil. The trust has assessee had
Chartered flight by Sri P.D. Patil, made advance payment of Rs. made
Director and Trustee of Dr. D.Y. 10.00 Lacs each on payments to
Patil pratishthan has given an 20.12.2002 and 20.01.2003 Taneja
advance of Rs. 20 lac prior to 31- respectively and Rs . 15.00 Aerospace
01-2003 & of Rs. 15 lac prior to Lacs on 27.07.2003 from Dr. for use of
30-11-2003. The bills have been D. Y. Patil Pratishthan, Pune their
adjusted from these advances. Division to Taneja Aerospace Aircrafts.
and Aviation Ltd. These The
payments are duly recorded in payments
the books of account of Dr. 37 made are
39 to 40
D.Y. Patil Pratishthan, Pune 133 to accounted in
381 to 382
Division. The photocopy of 172 of the books.
of PB
ledger extract of Taneja PB The AO has
Aerospace A/c for the F.Y. also
2002-03 & 2003-04 are accepted the
enclosed at Page No. 30 to 40. same.
However,
the AO in
the order
has alleged
that this
expenditure
resulted in
violation of
section
18
13(1)(c).
This is a
mere
presumption
and surmise
of the AO
and not
justified on
the facts of
the case.
The
expenditure
noted
therein in
duly
accounted
and hence, it
cannot be
considered
as an
incriminatin
g evidence.
19 3 d) Item No. 5 of Annexure 'A' to 2000-01 YES The assessee trust has
the Panchanama is a file purchased the Flat No.F-8 at
contiaining papers related to Gulmohar Palace Co-op.
purchase of property by Dr. D. Y. Housing Society, Koregaon
Patil Pratishthan vide deed of Park, Pune and the
assignment dated 30-09-2000 in consideration paid of Rs.
respect of property at Flat No8, 16.50 Lacs is duly accounted
Gulmohar Palace Co-op. Hsg. in the books of Dr. D. Y. Patil
Society Ltd., Koregaon Park. Pratishthan. The payment of
Pune Area-87 Sq. mtrs., Rs. 11,00,000/- was made on 37 to 38
38
Consideration- Rs16,50,000/- and 16.08.2000 and payment of & 41 Same
173 to
furniture Rs.4,25,000/- Rs.5,50,000/- is made on 379 to 380 comment as
313 of
06.10.2000. Copy of 37 to 38 & 383 of in Sr.No.17
PB
& furniture in that Flat No. F- PB
8 at Gulmohar Palace and the
consideration paid of Rs.4.25
Lacs is duly accounted in the
books of Dr. D. Y. Patil
Pratishthan. The payment of
Rs. 4,25,000/- was made on
06.08.2000. Copy of ledger
account extract is enclosed at
page no. 37 to 38 & 41
20 3 e) Item NO.6 of Annexure 'A' to
the Panchanama is a loose paper
bundle containing following
papers related to Dr. D. Y. Patil
Pratishthan:-
21 * Page 1 & 2 are bills of Roshani 2003-04 YES These Seized paper No. 1 & 2
Services, 479 C/480 A, Koregaon are statement / bill of Roshani
Park, Pune for the fuel purchased Services towards purchase of
by Dr. D.Y. Patil Pratishthan for petrol/diesel by Dr. D. Y.
its vehicles in the month of Feb., Patil Pratishthan, Pune
2004. Division for its vehicles in the
month of Feb 2004. These
bills are duly recorded in the
39 to
books of Dr. D. Y. Patil
42 to 45 40
Pratishthan's Dental College,
384 to 387 314 to NO
42 to 45 39 to 40 Pune
of PB 315 of
Division under the head of
PB
Travelling & Conveyance
A/C. The photocopy of
Ledger Extract of Travelling
& Conveyance AIC, Journal
Entry and Ledger extract of
Andhra Bank A/c towards
payment of bills are enclosed
at page no. 42 to 45
22 * Page 5 is a challan cum invoice of 2001-02 YES This seized document is
Cube Powe Care (P) Ltd., Dated photocopy of challan cum
11-08-2011 against the delivery invoice of Cube Power Care
of Generator set to Dr. D.Y. Patil Pvt. Ltd for purchase of
Pratishthan at Gulmohar, generator set. This purchase
Koregaon Park, Pune. Its of generator is duly recorded 19 to 20 41
payment is reflected at Page in the books of accounts of 361 to 362 316 of NO
No.18 of item No.1 above. Dr. D. Y. Patil Pratishthan, of PB PB
Pune Division. The
photocopy of ledger extract of
19 to 20 Generator Alc
towards recording of
generator 41 set purchased
19
from Cube Power Care Pvt.
Ltd.and ledger extract of
Cube Power Care Pvt. Ud.
towards payment appearing in
the books of Dr. D. Y. Patil
Pratishthan, Pune Division are
enclosed at page no. 20 & 21
23 * Page No. 6 & 7 are copies of 2000-01 YES These Seized paper No. 7 & 8
service invoices (Invoice No. are bills of Concorde Motors
P2000473) of vehicle (MH-12- Ltd. towards repair of vehicle
CA-6464) of D.Y. Patil by Dr. D. Y. Patil Pratishthan,
Pratishthan, C/o. Dr. D.Y. Patil Pune Division for its vehicle.
College of Engg. Pimpri, Pune - These bills are duly recorded 42 to
411018. Dt. 23-10-2000 of Rs. in the books of Dr. D. Y. Patil 46 to 48 44
31,542/- & Rs.846/- respectively. Pratishthan, Pune 46 to 48 42 388 to 390 317 to NO
to 44 Division on 23.10.2001 of PB 319 of
by Rs. 32,388/- under the head PB
of Repairs & Maintenance
A/C. The photocopy of ledger
extract of Repairs &
Maintenance Alc is enclosed
at page no 46 to 48.
24 * Page No. 15 is a charter bill dated 2000-01 YES This seized page no. 15 is
15-07-2000 of Rs. 30,595/- of Dr. regarding the use of chartered
D.Y. Patil Pratishthan, Opp H.A. flight by Dr. D. Y. Patil. This
Ltd., Pimpri, Pune. bill is amounting to
Rs.30,595/- dated 15.07.2000
of Taneja Aerospace and
Aviation Ltd. This bill along
with other bills for the FY.
2000-01 of Taneja Aerospace Same
49 to 54 45
and Aviation Ltd. are duly 49 comments
391 to 396 320 of
to 54 recorded in the books of as in
of PB PB
account of Dr. D. Y. 45 Patil sr.No.18
Pratishthan, Pune Division
under the head of Travelling
& Conveyance A/C. The
photocopy of Ledger Extract
of Taneja Aerospace A/c and
statement of Taneja
Aerospace are enclosed at
page no.49 to 54
25 * Page 16 is a copy of purchase 2004-05 YES This Seized page no. 16 is
order dated 13-05-2005 give by copy of purchase order no.
of Dr. D.Y. Patil Pratishthan's Dr. 2843/01 dated 22-03-2005 of
D.Y. Patil college of Engg. Dr. D. Y. Patil Pratishthan's
Akurdi, Pune-44 to Swift D. Y. Patli college of Engg.
Industries, Pune for Rs. 78,144/-. Akurdi, Pune-44 to Swift
Industries for Rs.78,144/-
towards supply of garden
55 to 56 46
hardware material. This bill is
397 to 398 321 of NO
duly recorded in the books of
of PB PB
account of D. Y. Patil college
of Engg. Akurdi, Pune-44
under the head of Garden
Maintenance on 29.03.2005.
The photocopy of ledger
extract of Swift Industries is
enclosed at page no. 55 to 56
10. Referring to paper Book Page 343 to 398 the learned counsel for the assessee drew the attention of the Bench to the various proofs/evidences to explain as to how all these entries reflected in the above documents are duly accounted for. Referring to the letter dated 02-05-2011 addressed to the CIT(A), a copy of which is placed at Paper Book Page Nos. 322 to 331 he submitted that it was explained by the assessee before the CIT(A) that all these documents did not constitute any 20 incriminating evidence and all the entries mentioned in these documents are duly accounted for.
11. The learned counsel for the assessee submitted that the proceedings u/s.153C can be initiated against a third person if the documents found pertain to him and they are incriminating in nature. If the documents are not incriminating in nature, the proceedings u/s.153C cannot be initiated against a third person. Giving an example he submitted that Telco has appointed more than 200 dealers throughout the country. If the premises of one of the dealer is searched and a list containing the names of the other dealers throughout India including that of the principal, i.e. Telco is found from the premises of the searched party giving sales made etc. to each dealer by Telco it is unthinkable to issue notice u/s.153C to all the dealers and the principal. Since in the instant case the documents found are not incriminating at all, therefore, the AO is not justified in initiating the proceedings u/s.153C against the assessee.
12. Referring to the following decisions of the Pune Bench of the Tribunal he submitted that under identical facts and circumstances the Tribunal has clearly held that if the documents relating to a third party found from the party searched are not incriminating in nature, the initiation of proceedings u/s.153C is not valid :
1. Sinhagad Technical Education Society [ITA No. 114 to 117/10] ITAT, Pune.
2. Bharati Vidyapeeth Vs. ACIT [ITA Nos. 917 to 922/PN/2010 & ITA Nos.1028 to 1033/PN/10] ITAT, Pune.
3. Parangtao Kadam Pratshthan Vs. DCIT [ ITA Nos.283 to 288/PN/11].
Referring to the decision of the Hon'ble Bombay High Court in the case of Mural Agro Products Ltd. vide ITA No. 36/2009 order dated 29-10-2010 he submitted that completed assessments could not be disturbed by making addition in absence of any material unearthed during the search or during 153A proceedings. He accordingly submitted that the 153C notice issued by the AO should be held as invalid and consequently the assessment order passed u/s.153C/143(3) should be 21 treated as invalid. He also relied on the decision of the Special Bench of the Tribunal in the case of Al Cargo Global Logistics Ltd. Vs. DCIT vide ITA No. 5108 to 5022 and 5059/M/2010 order dated 06-7-2012 for A.Ys 2004-05 to 2009-
10.
13. The learned DR on the other hand heavily relied on the order of the learned CIT(A). He submitted that the notice u/s.153C was issued by the AO and the assessee has cooperated during the assessment proceedings. No objection whatsoever was raised before the AO during the course of assessment proceedings challenging the issue of notice u/s.153C. Therefore, in view of the provisions contained in section 292B and 292BB, in absence of any objection raised by the assessee during the assessment proceedings the assessee cannot challenge the validity of the notice issued u/s.153C of the Income Tax Act.
14. Referring to the provisions of section 153C the learned DR submitted that the section does not contain the word incriminating. It is only the satisfaction of the AO and there is nothing like incriminating to be the yardstick for initiation of proceedings u/s.153C of the Income Tax Act. Referring to the decision of the Hon'ble Delhi High Court in the case of SSP Aviation Ltd. Vs. DCIT reported in 2012-305-HC-Delhi-IT he submitted that the Hon'ble High Court in the above decision has held that when during the search conducted on one person under Section 132, some documents or valuable assets or books of account belonging to some other person, in whose case the search is not conducted are found, then in that case the AO shall hand over the valuables or articles or books of accounts or documents etc. to the Assessing Officer having jurisdiction over the other person. Thereafter, the Assessing Officer having jurisdiction over the other person has to proceed against him and issue notice to that person in order to assess or reassess the income of such other person in the manner contemplated by the provisions of 22 Section 153A. Therefore, in the facts and circumstances of the case the issue of notice u/s.153C by the AO is fully justified. The Learned CIT DR also relied on the following decisions :
1. ACIT Vs. Panchmukh Deshmukh and Others reported in 133 TTJ 53/40 DTR 252.
2. Trilok Singh Dhillon Vs. CIT reported in 332 ITR 185.
3. Harvey Heart Hospitals Ltd. Vs. ACIT reported in 138 TTH 700/36 DTR 201.
4. Vijaybhai N. Chandrani Vs. ACIT reported in 333 ITR 436.
15. Referring to the findings of the CIT(A) and the various decisions relied on by him the learned DR submitted that the order passed by the CIT(A) being in consonance with the provisions of section 153C should be upheld. He submitted that the intention of the legislature has to be seen while bringing in the provisions of section 153C. He submitted that the various decisions cited by the learned counsel for the assessee are of the Pune Bench of the Tribunal. However, the revenue has relied on the decisions of various other Benches of the Tribunal and the decision of the Hon'ble Gujarat High Court and Hon'ble Chattisgarh High Court cited (Supra). He accordingly submitted that the order of the CIT(A) on this issue be upheld.
16. The learned counsel for the assessee in his rejoinder submitted that according to the provisions of section 292B return of income, assessment, notice, summons or other proceedings furnished or made or issued or taken or purported to have been furnished or made shall not be invalid merely by reason of any mistake, defect or omission in such return of income assessment, notice, summons etc. The issue in the instant case, however, is regarding the validity of the notice and not any omission or mistake in such notice. Therefore, the provisions of section 292B are not applicable. As regards the reliance on the provisions of section 292BB he submitted that the said provisions speak of service of notice not to be invalid in certain cases. In the instant case service of notice is not the issue and the issue is 23 regarding the validity of the issue of notice u/s.153C. Therefore, the provisions of section 292B/292BB cannot come to the rescue of the department.
17. So far as the decision of the Hon'ble Chattisgarh High Court he submitted that the seized materials contained the evidence that the assessee was transacting business through benamidars. However, in the instant case no such incriminating document was found and therefore the decision of Bilaspur Bench of the Tribunal in the case of ACIT Vs. Panchuram Deshmukh and Others which has later been upheld by the Hon'ble Chattisgarh High Court in the case of Trilok Singh Dhillon (Supra) cannot be applicable to the facts of the present case.
18. So far as the decision of the Hon'ble Gujarat High Court in the case of Vijaybhai N. Chandrani (Supra) he submitted that the said decision is not applicable to the facts of the present case. In that case the notice issued u/s.153C by the AO was quashed on the ground that the loose papers found at the time of search of one Housing Society do not belong to the assessee. The Hon'ble Gujarat High Court had no occasion to decide as to whether notice issued u/s.153C can be treated as valid in a case where no incriminating documents were found.
19. As regards the submission of the learned DR that intention of the legislature has to be seen he submitted that the Hon'ble Bombay High Court in the case of Murali Agro Products Ltd. (Supra) has held that the intention is to tax the undisclosed income. Therefore, the intension of the legislature is in favour of the assessee. So far as the various other decisions relied on by the learned DR he submitted that all those decisions relate to provisions of section 153A and not 153C.
20. He submitted that the Pune Bench of the Tribunal has already considered the decision of the Chennai Bench of the Tribunal in the case of Harvey Heart 24 Hospitals Ltd. (Supra), decision of the Hon'ble Gujarat High Court in the case of Vijaybhai N. Chandrani (Supra) and the decision of Bilaspur Bench of the Tribunal in the case of ACIT Vs. Panchuram Deskmukh and Others (Supra). Since the Pune Bench of the Tribunal in the various cases cited has consistently taken the view that if the documents belonging to a third party found from the searched party are not incriminating in nature, then the initiation of proceedings u/s.153C is not valid. Therefore, this is a covered matter in favour of the assessee and against the revenue. Accordingly, the notice issued u/s.153C has to be held as invalid and the subsequent proceedings made thereafter are also to be held as invalid.
21. So far as the decision of Hon'ble Delhi High Court in the case of SSP Aviation Ltd.(Supra) relied on by the learned DR is concerned he submitted that the said decision is rather in favour of the assessee. In the said decision it has been held that notice u/s.153C has to be issued by the AO having jurisdiction to the person who has not been searched but whose books of account or other valuable articles or documents belonging to such person is found from the premises of another person during a search. However, according to the said decision if the returns filed by the other person for the period of 6 years show that the income reflected in the documents has been accounted for then the proceedings will have to be closed and no further addition can be made. For this proposition the learned counsel for the assessee drew the attention of the Bench to para 14 to 17 of the order.
22. We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. There is no dispute to the fact that search u/s.132 took place in the premises of some of the trustees of the assessee trust during which certain documents belonging to the 25 assessee were found and seized. It is an admitted fact that no search has taken place in the case of the assessee. From the chart filed by the assessee we find all the documents found during the course of search belonging to the assessee have been duly reflected in the books of accounts of the assessee. Further, no addition has been made on the basis of the documents found during the course of search. Addition, if any, made by the AO in case of 6 documents are indirect additions. For example: although the repair and maintenance bills found during the course of search as per Page 32 and 33 of Annexure to Panchanama have been reflected in the books of account of the assessee trust addition has been made on the ground that such expenditure has resulted in violation of the provisions of section 13(1)(c) of the Income Tax Act. Similarly although the cost of the flats (as per item 2 and 5 of Annexure) used for guest house are already reflected in the books of account, the AO has presumed that the said flat is used for the personal purpose of the trustees for which he disallowed depreciation and maintenance charges. Similarly, although the AO has accepted that payments made to Taneja Aerospace and Aviation Ltd. for use of Aircrafts (item 3 of Annexure-A) are accounted for in the books maintained by the assessee, however he has held that the expenditure resulted in violation of section 13(1)(c) of the Income Tax Act. Similar is the case with Page No.15 of Annexure-A to the Panchanama.
23. We find the Pune Bench of the Tribunal in the case of Sinhagad Technical Educational Society (Supra) has held as under :
"7. We have heard the parties and perused the orders of the revenue. Further, we have gone through the voluminous paper books, written submissions, plenty of citations filed by both the parties to advance their respective arguments. On consideration of the original grounds and the additional grounds, we find it relevant to consider the additional ground first as it relates to the legal issue and it goes into the root of the matter. It questions the validity of the notice issued u/s 153C of the Act for all the four AYs under consideration. The relevant discussion is given in the following paragraphs of this order.
8. Additional Ground: Invalid Notices U/s 153C: In this regard, we have perused the reasons recorded by the AO of the assessee. We find that there exists the reasons for issue of notice u/s 153C of the Act and it is an undisputed fact. We also find that they are common reasons for all six AYs including the four AYs under consideration. The Counsel for the assessee argued vehemently that AO issued notices u/s 153C simply relying on the contents of section 26 153A(1)(b) of the Act and also its first proviso ignoring various settled legal propositions ie the concluded assessments, which fall in the bunch of six AY, should not disturbed unless there exists incriminating material relevant for the said AYs or concluded assessments and such incriminating material should be of that nature it should not be a dumb documents. In this regard, the stand of the revenue is that the express provisions are clear on the proposition that the AO is empowered under the statute to 'assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted.." (first proviso). Considering the contrary stands of the parties, without going into the merits of the additions, we have decided to adjudicate the legal issue ie additional ground and it involves the study the details of the reasons recorded by the AO based on which the AO issued the impugned notices u/s 153C of the Act for the impugned four AYs. For this purpose, we have extracted the relevant portion of the reasons and the same read as follows.
9. "Satisfaction Note for proceedings u/s 153C of the I T Act, 1961 in the case of M/s Sinhgad Technical Educational Society (STES), Pune.........
"1) page 11 - this is voucher of Sinhgad Technical Education Society (STES) dt. 17-01-2004 for cheque payment of Rs. 2.80 lacs to Amir Moiddin Shaikh.
2) page 12 - this is voucher of STES dt. NIL for cheque payment of Rs. 1 lacs to Amir Moiddin Shaikh.
3) page no. 13- this is voucher of STES Dt. 30.01.2005 for cheque payment of Rs. 2 lacs to Shaikh Amir Shaikh.
4) page no. 14- this is voucher of STES dt. 27.09.2004 for cash payment of Rs. 1 lacs to Shaki Amir Shaikh
5) page no. 15- this is voucher of STES dt. NIL for cheque payment of Rs. 50,000/-
to Shaikh Amir Shaikh.
6) pahe no. 45- this is an office copy of letter dt. 23.06.2007 written to director of DTE, Mumbai by Sinhgad College of Pharmacy, owned by STES.
Bundle no. A-2
7) page no. 35- there are the balances available to various institute of STES on or before 25.06.2005.
Bundle no. A-4
8) page no. 50 & 54 - these pages contains the details of staff arrangements made by the STES college of Engineering for admission process for F.Y. 2003-04.
9) page no. 58 to 60- these pages contain the details of expenses incurred by STES."
10. From the above, it is demonstrated by the Ld Counsel that the items at sl no 1 to 5 above belongs to the AY 2004-05 or thereafter. Referring to the rest of the items at sl. 6 to 9 above, the Counsel mentioned the said documents seized are either recorded in the books of account or involves cheque transactions. Thus, he summed up stating that the documents in question are neither the incriminating ones nor unaccounted transactions of the assessee and nor they relate to the impugned four AYs. In such circumstances, the AO not only assumed jurisdiction invalidly but also erred in disturbing the settled and completed assessments. Accordingly, AO should not assume jurisdiction in respect of such AYs in the absence of any incriminating information or transactions specific to any of the impugned four AYs ie 2000-01 to 2003-04. The contrary argument from the side of the revenue is that the overall approach in matters of concealment by the group assesses and all the discoveries of the search on Mr Navale and it concerns, have to be taken into account while forming the satisfaction within the meaning of section 153C of the act. Considering the divergent views of the parties, we have examined the said satisfaction note very closely and found that the impugned reasons mentioned by the AO are silent in so far as any AY- Specific-Incriminating-Information (ASII) or others ie unaccounted or undisclosed or hidden information to the revenue by the assessee. In our opinion, the impugned satisfaction note is very general one for six years. It is surprising to note that the AO has narrated some information against the Mr Navale HUF, which is not relevant for the present assessee. In the process, the AO totally missed the requirements of the law ie only the AY with the pending assessments and the AY with the AY specific incriminating documents/ transactions or seized asset should only be reopened under the provisions of the first proviso to section 153A of the Act and not otherwise.
11. In this regard, we have perused various legal propositions. First, we have perused the decision of this Tribunal in the case of Kumar Company for the AY 2000-01 (supra) and para 26 of the M/s. Kumar and Company vide ITA No. 463/PN/08 for the A.Y 2000-01 and the same reads as follows:-
27
25. Thus, we find that the seized documents belong to the assessee by way of limited ownership and they are not dumb documents as advocated by the Ld Counsel for the reason mentioned above. However, they are not found to be incriminating documents for the AY 2000-01.
The document may not be a dumb document and therefore a speaking one, but they must be the document with prima facie incriminating information too. Such incriminating nature of the seized document is an essential factor for switching on the proceeding u/s 153C. In other words, the document seized must not only be a 'speaking one' but also be prima facie 'incriminating one' for igniting the proceedings u/s153C. Unlike other AYs, there is nothing made out by the AO what is called incriminating for the current AY under consideration. When the impugned documents merely contains the notings of entries, which are already found place in the books of accounts or subjected to scrutiny of the AO in the past in regular assessment u/s 143(3) of the Act, such document cannot be said to be containing the incriminating information. What is the point in disturbing the settled assessment when the revenue does not have incriminating information for an AY and the information what is available is only routine one and when the AO merely makes an addition in the assessment u/s 153C based on change of opinion and when such additions are likely to be deleted in view of the settled nature of the issues? Income Tax provisions are not merely for the issue of notice u/s 153C but it is essentially for taxing the income of the person. What is point in issuing notice u/s 153C on flimsy grounds and finally tax nothing? Such proceedings only creates avoidable nuisance both to the over- burdened taxman and the much hazzled taxpayers. In the instant case, provisions of section 153C are invoked merely to apply the provisions of section 45(4) in this year, the issue which was already examined and concluded as inapplicable to the facts of the case. Such issue of notice is unwarranted and such reopening of the assessment for the AY 2000-01 is uncalled for.
26. Therefore, the proceedings initiated u/s 153C is not valid in view of the decision in the case of LMJ International (supra). Under these circumstances, we are of the opinion, the AO has invalidly issued the notice u/s 153C for the AY 2000-01 on the wrong presumption that AO can assume jurisdictional in respect all the six AYs automatically even with out any incriminating documents in respect of the concluded issues too. Accordingly, the relevant grounds of the assessee are allowed.
12. From the above, it is our finding that the reasons recorded by the AO as extracted above do not contain anything incriminating for the AYs upto 2003-04. It is the settled position of the law based on the decision of the Tribunal in the case of LMJ International (supra) that the issue of notice under the provisions of the first proviso to section 153A(1) of the Act is not automatic and there is need for AY-Specific Incriminating Information (ASII) in the possession of the AO to be the fountain head for springing satisfaction to him that there exists some income or asset to be assessed in the hands of any other person, who are referred to in section 153C of the Act. Reason for this kind of interpretation was already given in para 25 and 26 of our order in the case of Kumar Company for the AY 2000-01. In this regard, we posed question to ourselves if it is fair to reopen the assessment which is already concluded without any reason or logic thereby encroach on the rights of the tax payers? Should the AO be given unfettered or arbitrary powers to issue notice for the six AYs specified in the first proviso to section 153A(1) of the Act when the impugned assessments for the said six AYs are otherwise reached finality after due process of law. In our opinion, the answer is negative and it is in favour of the assessee. In any case, DR has not brought anything on record to demonstrate that the decisions given by the Tribunal in the case of LMJ International (supra) and M/s Kumar Company (supra) are not to be followed in this case. Our perusal of another order of the Tribunal in the case of M/s Kumar Company for the AY 2201 to 2003-04 vide ITA No 1020,1250,1021,1251,1022 & 1252/PN/2008, relied upon by the Ld DR is found distinguishable in so far as the existence of the incriminating document for the relevant AY is concerned. Whereas, in the instant case, first of all, there is no mention of any document in the said reasons relatable to the impugned four years and the incriminating nature of the same is out of question. Therefore, reliance of the DR on the said case is misplaced.
13. Further, we have examined various other judicial propositions mentioned by the Ld Counsel and some of them are reproduced as under.
1) Anil Kumar Bhatia & Ors. (2010) 1 ITR (Trib) 484 (Del) Conclusion:- "In respect of an assessment under s. 153A, where processing returns under s. 143(1)(a) stood completed in respect of returns filed in due course before search and no material is found in search thereafter, no addition can be made."
2) Suncity Alloys (P) Ltd. (2009) 124 TTJ (Jd) 674 28 Conclusion:- "Assessments or reassessments made pursuant to notice under s. 153A are not de novo assessment and therefore no new claim of deduction or allowance can be made by assessee where admittedly the regular assessments are shown as completed assessments on the date of initiation of action under s. 132."
3) Meghmani Organics Ltd. (2010) 129 TTJ (Ahd) 255 Conclusion:- "Record maintained by a person for his own purpose though referable to the assessee cannot be said to be belonging to the assessee within the meaning of s. 153C. Further, where none of the assessments are pending on the date of action under s. 153C, such assessments do not abate."
4) LMJ International Ltd. (2008) 119 TTJ (Kol) 214 Conclusion:- "Where nothing incriminating is found in the course of search relating to any assessment years, the assessments for such years cannot be distributed; items of regular assessment cannot be added back in the proceedings under s. 153C when no incriminating documents were found in respect of the disallowed amounts in the search proceedings."
5) Kailash Auto Finance Ltd. (2009) 32 SOT 80 (Luck) Conclusion:- "A notice under s. 148(1) can be issued even where notice under s. 143(2) has been pending and not closed. By processing the return and by issuing acknowledgment as token of accepting the return, the proceedings initiated by filing the return are terminated and no proceedings, therefore, remain pending."
6) R.M.L. Mehrotra (2010) 320 ITR 403 Conclusion:- "Undisclosed income of the block period has to be determined on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the A.O and relatable to such evidence; AO cannot compute the income on the basis of best judgement."
14. From the above, it is evident that the where nothing AY and assessee specific incriminating "money, jewellery or other valuable article or thing or books of account or documents", the assessments for assessee years cannot be distributed. Further, the concluded assessments should not be disturbed merely for making routine additions, which could have been otherwise done in the regular assessment and of course, the pending assessments fall under exceptions. As stated by the Ld Counsel point no 9 of his note reproduced above, "nothing is seized pertaining to A.Y 2000-01 to 2003-04 obviously there is no question of recording satisfaction note. On this reasoning itself, we find that the assessee has to succeed. Therefore, we do not examine the other arguments of the counsel. Otherwise, the counsel argued that the reopening of the assessment for the AY 2000-01 to 2001-02 is impermissible in view of the judgment of Allahabad bench in the case of Vijay Vimawal vs. ACIT 124 TTJ 508. Further, he also argued that the assessment of A.Y 2003-04 was actually completed u/s. 143(3) on 30/03/2006 ie prior to receipt of the impugned documents by the Assessing Officer on 18/04/2007, this assessment was not pending. Attending to these arguments of the counsel is superfluous and merely an academic exercise as we have upheld the applicability of the decision of the Tribunal in the case of LMJ International Ltd (supra) for the proposition that the "where nothing incriminating is found in the course of search relating to any assessment years, the assessments for such years cannot be distributed" and other local decision cited above. Accordingly, the additional ground raised by the assessee for all the four appeals under consideration are allowed and in favour of the assessee.
15. As the additional ground for all the four years are allowed in favour of the assessee, we are of the considered opinion the adjudication of the grounds relating to the merits of the additions is merely an academic exercise. Therefore, the relevant grounds in all the four appeals are dismissed as academic."
24. Similarly, we find the Pune Bench of the Tribunal in the case of Bharati Vidyapeeth Medical Foundation (Supra) has held as under :
"20. In the instant case as expressively mentioned by the revenue authorities that the AO issued notices u/s 153C of the Act simply relying on the contents of section 153A(1)(b) of the Act and also its first proviso. It is the stand of the department as discussed in the preceding paragraphs of this order that there is no need for the AY-specific seizure and handing over of the document to the AO of the assessee as the provisions of section 153C of the Act. AO relied on the plain reading of the relevant provisions of the said sections. In the process, revenue ignored various settled legal propositions on the subject. The said propositions are that the concluded assessments, which fall in the bunch of six AY should not be disturbed unless there exists AY specific incriminating material relevant for each of the said AYs or concluded assessments and it 29 should not be a case of dumb documents. Probably, from the revenue's point of view, the said propositions are dilution of the express provisions which reads that AO may 'assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted.." (first proviso). It is also fact that the decision in the case of LMJ International Ltd. (2008) 119 TTJ (Kol) 214 is undisturbed as on date and it is relevant for the proposition that "Where nothing incriminating is found in the course of search relating to any assessment years, the assessments for such years cannot be distributed; items of regular assessment cannot be added back in the proceedings under s. 153C when no incriminating documents were found in respect of the disallowed amounts in the search proceedings." Nothing is brought to our notice by the revenue contrary to the above and the decisions relied on by the DR are otherwise distinguishable on facts.
21. In the present case of the assessee and in the appeals arising from the order of the AO under section 153C rws 143(3) of the Act for the AY AYs 2000-01 to 2005-06, there are six AYs. Based on the existence of the seized documents, these six AYs can categorized into two categories. (i) the AYs without seizure of any documents or any other seizures as referred to in the provisions of section 153C of the Act; and (ii) the AY with the seizure of some documents as referred to in the provisions of section 153C of the Act.
22. Appeals by the Assessee - AYs 2000-01 to 2003-04 & 2005-06: In connection with the AYs at sl no (i) above ie AYs 2000-01 to 2004-05, admittedly, there is no seizure of the documents as evident from the satisfaction note and the tables explained by the assessee. Considering the above scope of the provisions and legal propositions already adopted by this bench in the case of Sinhgad Technical Education Society (supra), we are of the opinion that the issuance of notices u/s 153C for the AYs 2000-01 to 2003-04 & 2005-06, where there are no seized documents, is invalid.
23. In so far as the lone appeal for the revenue in respect of the appeal ITA1039/PN/10 for AY 2003-04 is concerned, the same has to be dismissed without going in to the merits of the ground as we quashed the assessment proceedings in view of the invalid notice.
24. Appeals by the Assessee - AY 2004-05: In connection with the AYs at sl no (ii) above ie AYs 2004-05, admittedly, there is some seizure of the documents as evident from the satisfaction note. We are convinced that the said ledger is an accounted one. Further, the reasoning given by us in the order in the case of Sinhgad Technical Education Society (supra) apply to the issue in these appeals mutatis mutandis. In other words, the views approved by this bench in the case of Sinhgad Technical Education Society (supra) and Kumar Company (supra) are affirmed by the said Judgment of the Gujarat High Court in the case of Vijaybhai N Chandani 231CTR 474 (Guj) and mere appearance of names does not mean anything as section 153C of the Act is intended for taxing the undisclosed income of the third party based on the material/others seized during the search action. As such, only the unaccounted and incriminating material or others listed in the said section are only seized during the search and the accounted documents should not be seized. Seizure of the documents is aimed at the unearthing of the unaccounted income of the assessee assessable u/s 153A or the other third parties subjected assessment u/s 153C of the Act. When the documents do not indicate any undisclosed income, the ledger in the instant case, what is the relevance of such document? Such ledger constitutes merely an accounted one with no financial implications. Thus, the documents, the ledger in the instant case relevant for the AY 2004-05, with no financial implications can neither be considered incriminating nor be considered capable of springing satisfaction to any AO that there is scope of undisclosed income in respect of the third party assasable u/s 153C of the Act. Accordingly, the legal grounds raised in all these appeals of the assessee relating to the validity of the notice u/s 153C of the Act are allowed in favour of the assessee in respect of all the AYs under consideration. Further, we are of the considered opinion that the adjudication of the other grounds relating to the other legal and merit oriented issues is merely an academic exercise. Therefore, the relevant grounds in all the four appeals are dismissed as academic.
25. In the result all the six appeals of the assessee are allowed and consequently, the cross appeal by the revenue vide ITA1039/PN/10 for AY 2003-04 is dismissed."
25. We find the Pune Bench of the Tribunal in the case of Patangrao Kadam Pratishthan (Supra) has held as under :
30
"11. The above extracts are self contained one and they relate to decision in the case of Sonhira Foundation for Rural Development (Supra). We have decided the issue in favour of the assessee relying on our decisions in the case of Sinhagad Technical Education Society, kumar and Co. copies of which are filed before the CIT(A) and also other orders in the cases of Bharati Vidyapeeth, Bharati Vidyapeeth Medical Foundation (Supra). These imported paragraphs contained an important discussion on the issues relating to the validity of the notice u/s.153C of the Act and adjudication in the sense that we have analysed the provisions of section 153C of the Act, the existing precedents on the topic relating to the validity of the notice issued u/s.153C of the Act, so called recent decisions relied upon by the CIT(A) and the CIT DR and came to the conclusion that the AO of those assessee invalidly assumed jurisdiction. In fact, the CIT(A) attempted to distinguish the orders of this Tribunal, certainly not on the facts, but on the ground of recent decisions, which are actually decided in the context of the provisions of section 153A of the Act and on the issue of the meaning of 'belong'. None of them are on the issue discussed herein. In our opinion, this kind of approach of the Income Tax Authorities amounts to the non compliance to the binding judgment in the case of Bank of Baroda supra and Dunlop India Ltd. supra. We have narrated these issues also in the above extracted paragraphs.
12. Thus, we have no doubt in our minds that the said ratio is equally applicable to the facts of the instant case. Eventually, for the AO to assume jurisdiction validly in any case u/s.153C of the Act, there is need for AY-Specific incriminating documents with the AO. AO cannot issue the said notice automatically in respect of the six AYs specified in the proviso to section 153C(1) of the Act on the basis of any and every accounted but seized documents. Accordingly, the legal issues raised by the assessee in all these six appeal relating to the validity of the notices u/s.153C for the AYs 2000-01 to 2005-06 are decided in favour of the assessee. Therefore, ground 1 with its sub grounds is allowed.
13. Since the preliminary issue is decided in favour of the assessee for all the six AYs which are under consideration, the adjudication of other legal issues as well as the merit oriented issues raised in the appeals become academic and therefore, we proceed the dismiss the same as academic.
14. In the result, all the six appeals of the assessee are allowed.
ITA No. 306 to 311/PN/2011 BY REVENUE (Assessment Year : 2000-01 to 2005-06)
15. Hither to, we have dealt with one of the legal issues relating to validity of the jurisdiction of the AO u/s.153C of the Act in respect of the six appeals for the AY 2000-01 to 2005-06 of this assessee. On considering the fact that the revenue has not seized any incriminating or undisclosed money, bullion, jewellery or other valuable article or thing or books of account of documents belonging to the assessee for the AYs 2000-01 to 2005-06, we have upheld the invalidity of the said notices and in favour of the assessee. Now, we shall take up the revenue's appeals for all the six years. It is an agreed position that, in view of our decision above, the adjudication of these appeals by the revenue become merely an academic exercise. Therefore, all the grounds of the revenue in respect of the six AYs under consideration have to be dismissed as an academic exercise.
16. In the result, six appeals of the revenue are dismissed."
26. Nothing contrary was brought to our notice against the above decisions of the Pune Bench of the Tribunal. However, we find the Pune Bench of the Tribunal while passing above decisions did not have the benefit of decision of the Hon'ble Delhi High Court in the case of SSP Aviation Ltd. (Supra) wherein the Hon'ble High Court has held as under :
"14. Now there can be a situation when during the search conducted on one person under Section 132, some documents or valuable assets or books of account belonging to some other person, in whose case the search is not conducted, may be found. In such case, the Assessing Officer has to first be satisfied under Section 153C, which provides for the assessment of income of any other 31 person, i.e., any other person who is not covered by the search, that the books of account or other valuable article or document belongs to the other person (person other than the one searched). He shall hand over the valuable article or books of account or document to the Assessing Officer having jurisdiction over the other person. Thereafter, the Assessing Officer having jurisdiction over the other person has to proceed against him and issue notice to that person in order to assess or reassess the income of such other person in the manner contemplated by the provisions of Section 153A. Now a question may arise as to the applicability of the second proviso to Section 153A in the case of the other person, in order to examine the question of pending proceedings which have to abate. In the case of the searched person, the date with reference to which the proceedings for assessment or reassessment of any assessment year within the period of the six assessment years shall abate, is the date of initiation of the search under Section 132 or the requisition under Section 132A. For instance, in the present case, with reference to the Puri Group of Companies, such date will be 5.1.2009. However, in the case of the other person, which in the present case is the petitioner herein, such date will be the date of receiving the books of account or documents or assets seized or requisition by the Assessing Officer having jurisdiction over such other person. In the case of the other person, the question of pendency and abatement of the proceedings of assessment or reassessment to the six assessment years will be examined with reference to such date.
15. It needs to be appreciated that the satisfaction that is required to be reached by the Assessing Officer having jurisdiction over the searched person is that the valuable article or books of account or documents seized during the search belong to a person other than the searched person. There is no requirement in Section 153C(1) that the Assessing Officer should also be satisfied that such valuable articles or books of account or documents belonging to the other person must be shown to show to conclusively reflect or disclose any undisclosed income.
16. It will be appreciated from the above that the procedure envisaged by Section 153C, which is applicable to the petitioner herein, does not in any way infringe any rights of the petitioner or curtail or curb his right to be heard by the Assessing Officer or to file appeals and question the assessments made pursuant to the notice under Section 153A. There is no ground for any apprehension that the petitioner will not be heard before the assessments or reassessments for the six assessment years are completed. In fact, in the case of the petitioner itself the Assessing Officer has not made any addition in the assessments completed under Section 153A read with Section 153C for the assessment years 2003-04 to 2006-07 and 2008-09. He has made the addition of Rs.86 crores only in the assessment year 2007-08 against which an appeal has already been filed, as stated by the ld. senior standing counsel. This also finds mention in para VI of the counter affidavit filed by the respondent. Thus, full opportunity of being heard is available, and in fact was made available to the petitioner herein to represent against the proposed assessments or reassessments. The apprehension expressed by Mr. Bajpai, ld. senior counsel for the petitioner seems to be futile and spartan in the present case, as no adverse order/ addition has been made except in one year, i.e. 2007-08 in respect of which documents were found. This addition is also pending in appeal.
17. The judgment of this court in Saraya Industries Ltd. ( supra ) was relied upon by Mr. Bajpai, in support of his contention that the seizure of the document must be of such nature that even closed assessments for six years could be reopened and this requirement postulates that the provisions of Section 153C can be set in motion only if there is a finding that the seized document or books of account or valuable article represents the undisclosed income of the other person. The said decision does not assist the petitioner. The section merely enables the revenue authorities to investigate into the contents of the document seized, which belongs to a person other than the person searched so that it can be ascertained whether the transaction or the income embedded in the document has been accounted for in the case of the appropriate person. It is aimed at ensuring that income does not escape assessment in the hands of any other person merely because he has not been searched under Section 132 of the Act. It is only a first step to the enquiry, which is to follow. The Assessing Officer who has reached the satisfaction that the document relates to a person other than the searched person can do nothing except to forward the document to the Assessing Officer having jurisdiction over the other person and thereafter it is for the Assessing Officer having jurisdiction over the other person to follow the procedure prescribed by Section 153A in an attempt to ensure that the income reflected by the document has been accounted for by such other person. If he is so satisfied after obtaining the returns from such other person for the six assessment years, the proceedings will have to be closed. If the returns filed by the other person for the period of six years does not show that the income reflected in the document has been accounted for, additions will be accordingly made after following the procedure prescribed by law and after giving adequate opportunity of being heard to such other person. That, in sum and substance, is the position."32
27. Since in the instant case certain documents belonging to the assessee trust have been found during the course of search in the premises of the trustees, therefore, issue of notice u/s.153C of the Income Tax Act by the AO is a valid notice in view of the decision of Hon'ble Delhi High Court in the case of SSP Aviation Ltd. (Supra). However, since all the entries found in those documents have already been reflected in the books of accounts as per the chart furnished by the assessee which have been reproduced at Para 9 of this order and which have been analysed above and which could not be controverted by the learned DR, therefore, in view of the decision of the Hon'ble Delhi High Court in the case of SSP Aviation Ltd. (Supra) further proceedings should have been closed by the AO. Otherwise it will cause undue harassment to the assessee. In our opinion the AO in the garb of proceedings u/s.153C cannot make roving and fishing enquiries after assessee proves that entries recorded in the documents seized from the searched party which belong to the assessee are already reflected in the regular books of account maintained. In this view of the matter and respectfully following the decision of the Hon'ble Delhi High Court in the case of SSP Aviation Ltd.(Supra) we hold that the notice issued u/s.153 is a valid notice. However, since the assessee has satisfactorily explained that entries found in the seized documents are reflected in the regular books of account, further proceedings u/s.153C will have to be closed and no further addition can be made by making roving and fishing enquiries since the assessee cannot be put to undue harassment. Since the assessee succeeds on this preliminary issue we refrain ourselves from adjudicating the other grounds by the assessee as well as the revenue on merit.
28. In the result, the appeal filed by the assessee is allowed and the appeal filed by the revenue is dismissed.
33ITA Nos. 1587/PN/2011 to 1591/PN/2011 (A.Ys.2001-02 to 2005-06) and ITA Nos.1607/PN/2011 to 1611/PN/2011 (A.Y.s 2001-02 to 2005-06) :
29. After hearing both the sides we find no addition has been made on the basis of entries in the documents seized during the course of search u/s.132 in the premises of the trustees and no search has taken place in the case of the assessee. The entries in the documents seized have been duly reflected in the books of account maintained by the assessee and no addition has been made by the AO on the basis of the documents seized as per the chart filed by the assessee. We have already decided the appeal in ITA No. 1586/PN/2011 for A.Y. 2000-01 filed by the assessee by holding that although the notice issued u/s.153C is a valid notice, however, when the assessee explains to the satisfaction of the AO that entries in the documents found and seized have already been entered in the regular books of account and no addition has been made on the basis of such seized documents, then further proceedings u/s.153C have to be closed and the AO cannot make further additions by making fishing and roving enquiries in the garb of expanding the provisions of section 153C. The assessee in such case cannot be put to undue harassment. Following the same ratio, we hold that no addition could have been made. We accordingly allow the appeals filed by the assessee for the above years on this preliminary issue. Since we allow the appeals of the assessee on the preliminary issue we refrain from adjudicating other grounds by the assessee as well as the revenue on merit.
30. In the result all the appeals filed by the assessee are allowed and all the appeals filed by the revenue are dismissed.
Pronounced in the Open court on this the 07th day of September 2012.
Sd/- Sd/-
(SHAILENDRA KUMAR YADAV) (R.K. PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
th
Pune, dated the 07 September 2012
satish
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Copy of the order is forwarded to :
1. The assessee
2. Department
3. CIT Central, Pune
4. ACIT Central, Kolhapur
5. D.R. "B" Bench, Pune
6 Guard File
By order
// True Copy //
Senior Private Secretary,
Income Tax Appellate Tribunal, Pune