2018 (10) TMI 1987 - AT - Income Tax

Assessment u/s 153C - addition of unexplained cash expenditure made on account of the assessee's land purchases - impugned documents found from the possession of third person - Whether no assessment or re-assessment proceedings in relation to this year were pending as on the date of the search u/s.132? - HELD THAT - As decided by HC in the group concerns 2017 (7) TMI 141 - BOMBAY HIGH COURT jurisdiction and vesting in the Assessing Officer could have been exercised and the satisfaction in that regard was enough, are not matters which can be decided in the further appellate jurisdiction of this Court. It is not possible for us to reappraise and reappreciate the factual findings. The finding that Section 153C was not attracted and its invocation was bad in law is not based just on an interpretation of Section 153C but after holding that the ingredients of the same were not satisfied in the present case. That is an exercise carried out by the Tribunal as a last fact finding authority. Therefore, the finding is a mixed one. There is no substantial question of law arising from such an order and which alternatively considers the merits of the case as well. As a result of the above conclusion, we cannot agree with the learned Additional Solicitor General that we can pass a different order and entertain these Appeals for the current year of the search, namely, the Assessment Year 2009-10. That was based on the argument that the action under Section 153C for this year is an incorrect conclusion. All the earlier orders in these Appeals having being noted by us, we have no hesitation in concluding that despite sufficient opportunity being given to the Revenue, it has not been able to satisfy this Court that a different view can be taken. There is also a distinction between loose papers found from the possession of assessee and similar documents found from a third person. In the present case, impugned documents were not found from the possession of the assessee but was found from the possession of a third person - Mere mention of the names of the villages where the companies may have purchased lands would not give any basis to assume/presume/surmise that the name of the companies are mentioned in the impugned documents. The very foundation of Sec. 153C has been shaken by not fulfilling the condition precedent/or the issue of notice. It is the say of the Ld PR that in the present case there is no need for recording of the satisfaction. If this plea of the DR is accepted then the legislative intent of inserting sec. 153C in the Act would get defeated because the AO will get unstoppable powers to reopen assessments for 6 year in the case of the ' Other Person ' without recording any basis satisfaction for his action. Therefore this plea of the Id DR cannot be accepted. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of proceedings under Section 153C of the IT Act.
2. Relevance and interpretation of seized materials.
3. Addition of alleged unexplained expenditure under Section 69C.
4. Penalty under Section 271AAA.

Issue-wise Detailed Analysis:

1. Validity of Proceedings under Section 153C:
The assessee contended that the initiation of proceedings under Section 153C was invalid as no assessment or reassessment proceedings were pending on the date of the search under Section 132. The Tribunal found that the documents seized did not belong to the assessee but were found at the premises of a third party, Shri Dilip Dherai. The Tribunal emphasized that for Section 153C to apply, the seized documents must belong to the assessee, which was not the case here. The Tribunal also noted that the satisfaction note recorded by the AO was not based on any prima facie evidence linking the seized documents to the assessee. This view was upheld by the Bombay High Court, which confirmed that the action under Section 153C was bad in law.

2. Relevance and Interpretation of Seized Materials:
The assessee argued that the seized materials were related to land companies and not to them, and thus should be disregarded. The Tribunal observed that the documents found were rough estimates and budgetary figures, not actual evidence of cash transactions. The Tribunal noted that the AO's conclusion was based on loose papers and not supported by corroborative evidence, such as statements from land sellers or records of actual cash payments. The Tribunal cited various judicial precedents, emphasizing that additions based on uncorroborated loose sheets are not sustainable.

3. Addition of Alleged Unexplained Expenditure under Section 69C:
The Tribunal scrutinized the addition of Rs. 7,98,02,500 made by the AO under Section 69C, which was based on the interpretation of seized documents. The Tribunal found that the AO's reliance on the statement of Shri Dilip Dherai, who later retracted his statement, was misplaced. The Tribunal highlighted that there was no independent evidence to prove that the assessee incurred the alleged cash expenditure. It was noted that the balance sheet of the assessee indicated insufficient funds to support such a large cash transaction. The Tribunal concluded that the addition under Section 69C was based on conjectures and surmises without any concrete evidence, and thus, could not be sustained.

4. Penalty under Section 271AAA:
Given that the Tribunal deleted all the additions made by the AO, the penalty imposed under Section 271AAA was also deemed unsustainable. The Tribunal reasoned that since the primary additions were invalid, the basis for the penalty no longer existed.

Conclusion:
The Tribunal allowed the appeals of the assessee, quashing the proceedings under Section 153C and deleting the additions made under Section 69C. Consequently, the penalty under Section 271AAA was also deleted. The Tribunal's order was based on a thorough evaluation of the seized materials, the legal requirements for invoking Section 153C, and the lack of corroborative evidence for the alleged cash transactions. The Bombay High Court upheld the Tribunal's decision, affirming that the action under Section 153C was invalid and that the additions were not justified.