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2019 (4) TMI 1306 - AT - Income TaxAssessment u/s 153C r.w.s. 153A - proof of incriminating material found in search - HELD THAT - Assessing Officer of the searched Company only stated that he was satisfied that sheet numbered 18-19 of the Annexure A/CPL/01 belonged to the assessee but failed to mention that these papers do not belong to the search Company namely M/s. Coastal Projects Ltd. Before the provisions of Section 153C of the said Act can be invoked the Assessing Officer of the searched person must be satisfied that the seized material (which includes documents) does not belongs to the person referred to in Section 153A (i.e. the searched person). As in PEPSI FOODS PVT. LTD. VERSUS. ASSISTANT COMMISSIONER OF INCOME TAX 2014 (8) TMI 425 - DELHI HIGH COURT had stated that the normal presumption is that the document found during the search belongs to the person on whom the search was conducted. Therefore it is for the Assessing Officer of the searched person to rebut that presumption and come to a conclusion or satisfaction that the document in fact belongs to somebody else. It is necessary that before the provisions of Section 153C of the said Act can be invoked the Assessing Officer of the searched person must be satisfied that the seized material (which includes documents) does not belongs to the person referred to in Section 153A (i.e. the searched person). Since the Hon ble Jurisdictional High Court decisions mentioned above is in favour of the assessee the Assessing Officer of the search Company namely DCIT Central Circle-4 Hyderabad in the Satisfaction Note had not stated that the seized material do not belong to the searched person. Therefore based on the above decisions of the Hon ble Jurisdictional High Court the issue of notice under section 153C of the Act to the assessee had to be considered as illegal and as a result Ld. CIT(A) has rightly allowed the legal grounds raised by the assessee hence we do not find any infirmity in the action of the Ld. CIT(A) therefore we uphold the action of the Ld. CIT(A) on the legal issues and dismissed the legal grounds raised by the Revenue. Undisclosed income - sale of property - HELD THAT - Assessing Officer presumed that the assessee had received the entire consideration of 6, 45, 00, 000/- though the seized document only indicates that there was some negotiations for the sale of property bearing No. Sector-65 Noida and there is no indication in it of any definite transaction. There is no mention in the assessment order about the date of sale or any detail regarding the sale transaction. The seized document also indicates the possibility of M/s. Coastal Projects Ltd. acquiring the Company M/s. Humming Birds Solution Pvt. Ltd. which had the property at C-l Sector-65 Noida. Since it is clearly mentioned in the assessment order that 70, 00, 000/- of the consideration was paid by cheque the Assessing Officer should have at least traced this cheque payment. If there was evidence that the cheque of 70, 00, 000/- was received by the assessee Sh. Gulshan Kumar Sethi then there was some basis for considering that the assessee had received the entire sale consideration of 6, 45, 00, 000/- for transferring the property either through a sale deed or through the outright transfer of the shares of the Company. In the absence of any such concrete evidence the addition of 6, 45, 00, 000/- on the assessee is based only on assumptions and thus not sustainable. AO had failed to carry out any enquiries to find out the actual recipient / recipients of 6, 45, 00, 000/- from M/s. Coastal Projects Ltd before adding the above sum as assessee s undisclosed income. In the absence of any concrete evidence to indicate that the assessee had received the sum of 6, 45, 00, 000/- from M/s. Coastal Projects Ltd. Ld. CIT(A) has rightly deleted the addition of 6, 45, 00, 000/- made by the AO which does not need any interference on our part hence we uphold the order of the Ld. CIT(A) on this issue and dismiss the ground raised on the merits of the case. - Decided against revenue
Issues Involved:
1. Legality of the notice issued under section 153C of the Income Tax Act. 2. Validity of the addition of ?6,45,00,000 as undisclosed income. Detailed Analysis: Issue 1: Legality of the Notice under Section 153C The Revenue challenged the order of the CIT(A) which held the notice under section 153C as illegal. The CIT(A) found that the Assessing Officer (AO) of the searched party, M/s Coastal Projects Ltd., did not state that the seized documents did not belong to the searched party, which is a prerequisite for invoking section 153C. The Delhi High Court in the cases of Pepsi Foods Pvt. Ltd. vs. ACIT and Pepsico India Holdings Pvt. Ltd. vs. ACIT established that the AO must first be satisfied that the documents do not belong to the searched person before handing them over to the AO of another person. Since this step was not fulfilled, the issue of notice under section 153C was deemed illegal. Relevant Findings: - The AO of the searched party only mentioned that the documents belonged to the assessee but did not state that they did not belong to M/s Coastal Projects Ltd. - The CIT(A) relied on the Delhi High Court's rulings which mandate that the AO must first rebut the presumption that the documents belong to the searched person. - The Tribunal upheld the CIT(A)'s decision, stating that the notice under section 153C was illegal as the first step of satisfaction was not met. Issue 2: Addition of ?6,45,00,000 as Undisclosed Income The Revenue also contested the deletion of the addition of ?6,45,00,000 made by the AO as undisclosed income. The CIT(A) found that the addition was based on presumptions without concrete evidence. The AO presumed that the assessee received the entire consideration for the sale of property, but there was no evidence to support this. The property in question belonged to M/s Humming Birds Solution Pvt. Ltd., and the assessee had ceased to be a director of this company since 2007. Relevant Findings: - The CIT(A) noted that the seized documents indicated negotiations but no definitive transaction. - The AO did not verify the recipient of the cheque payment of ?70,00,000. - The CIT(A) found no evidence in the assessment records indicating that the assessee received ?6,45,00,000. - The Tribunal agreed with the CIT(A) that the addition was based on assumptions and not sustainable without concrete evidence. Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order that: 1. The notice under section 153C was illegal due to non-compliance with the required satisfaction step. 2. The addition of ?6,45,00,000 as undisclosed income was unsustainable due to lack of evidence.
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