2020 (6) TMI 462 - AT - Income Tax

Assessment u/s 153A/153C - Whether document was incriminating in nature nor any addition has been made by the AO based on such seized documents ? - basis for addition in this case is based on survey material - HELD THAT - It is clear that the satisfaction note u/s.153C was based on certain seized documents found during the course of search and seizure action initiated in Kalra Group cases/Consortium Securities Pvt. Ltd. From a bare perusal of the satisfaction note, it can be seen that the seized documents are mainly MOUs between promoters of Realtech group, namely, Shri Yogesh Gupta, Shri Pankaj Dayal and Shri Rajeev Behl along with the some working of the Realtech Group. There is no reference in the assessment order or in the seized documents that these are in the nature of incriminating documents from where inference can be drawn that there is any undisclosed income or any other income which has escaped assessment. Now it is well settled law to acquire jurisdiction u/s.153C, the seized documents must be incriminating and must relate to the assessment year whose assessment are sought to be reopened. If the documents seized have no relevance or bearing on any income of the assessee for the relevant Assessment Year which could not possibly reflect any undisclosed income, then provision of Section 153C cannot be resorted too. Here, in this case, the seized documents as noted above and also noted by the Ld. CIT(A) is not incriminating at all and has no co-relation with any undisclosed income of the assessee and accordingly based on such documents the jurisdiction u/s.153C could not have been initiated. Onus was on the Revenue to show that incriminating material/ document recovered at the time of search belongs to the assessee and it is not enough for the Revenue to show that documents pertained to the assessee or contains information that relates to the assessee. Also it is seen that the Ld. CIT (A) has noted that the assessee has disclosed a sum of ₹ 24.50 crores as additional income during survey owing to such real estate business of the assessee, and therefore, if at all there is any element of cash payment or cash income and the source of income of the business is the same and no further evidence has been found or investigated during the assessment proceedings, then no addition can be made again in this Assessment Year.- Decided against revenue.

Issues Involved:
1. Validity of proceedings under Section 153C of the Income Tax Act.
2. Reliability of evidence and statements.
3. Nature of the seized documents.
4. Jurisdictional requirements for initiating proceedings under Section 153C.
5. Relevance of additional income disclosed in previous assessments.

Issue-wise Detailed Analysis:

1. Validity of proceedings under Section 153C:
The appeal was filed by the Revenue against the deletion of an addition of ?13,90,26,749/- made by the Assessing Officer (AO) under Section 153C/143(3) for the Assessment Year 2011-12. The proceedings were initiated based on documents seized during a search on the Kalra Group on 28.07.2011, which were believed to relate to M/s. Realtech Constructions Pvt. Ltd. The AO issued a notice under Section 153C on 12.08.2013, but the Ld. CIT (A) observed that the satisfaction for initiating proceedings was recorded on 08.08.2013, based on MOUs found during the search. The Ld. CIT (A) concluded that the addition was based on a document found during a survey, not during the search, making the proceedings under Section 153C technically invalid.

2. Reliability of evidence and statements:
The AO relied on a computer printout found during a survey at the premises of Mr. Yogesh Gupta, which detailed payments received by M/s. Meter & Instrument Pvt. Ltd. from M/s. Realtech Constructions Pvt. Ltd. Mr. Yogesh Gupta's statement, which accepted the transactions as real, was deemed unreliable by the Ld. CIT (A) due to disputes among the promoters and his lack of stake in the company at the time of the survey. The Ld. CIT (A) noted that the statement alone could not bind the assessee company as evidence.

3. Nature of the seized documents:
The seized documents included MOUs between promoters of Realtech Group and details of assets and liabilities of different projects. The Ld. CIT (A) found that these documents were not incriminating and did not indicate any suppression of income by the assessee. The addition was based on a standalone computer printout found during a survey, which was not signed by the assessee and was found at Mr. Yogesh Gupta's premises. The Ld. CIT (A) concluded that the document did not substantiate the generation of unexplained cash by the assessee.

4. Jurisdictional requirements for initiating proceedings under Section 153C:
The Ld. CIT (A) emphasized that for proceedings under Section 153C to be valid, the seized documents must be incriminating and relate to the assessment year in question. The satisfaction note by the AO did not indicate that the documents were incriminating or related to any undisclosed income. The Ld. CIT (A) relied on judicial precedents, including the Hon'ble Delhi High Court's judgment in RRJ Securities, which required seized documents to be incriminating to justify the assumption of jurisdiction under Section 153C.

5. Relevance of additional income disclosed in previous assessments:
The Ld. CIT (A) noted that the assessee had already disclosed ?24.50 crores as additional income during a survey for the relevant real estate business. The AO did not substantiate that the cash mentioned in the impugned document was over and above the surrendered income. The Ld. CIT (A) concluded that it was not appropriate to consider the cash as income of the assessee again, as no new evidence was found to support the addition.

Conclusion:
The Ld. CIT (A) deleted the addition of ?13,90,26,749/- by concluding that the proceedings under Section 153C were not justified, as the documents were not incriminating, and the addition was based on a survey document unrelated to the seized documents. The Tribunal upheld the Ld. CIT (A)'s order, dismissing the Revenue's appeal and confirming that the addition was beyond the scope of Section 153C.

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