2021 (8) TMI 652 - AT - Income Tax

Assessmentt u/s 153C - documents found stated to be relating to the assessee company or not? - proof of recording of satisfaction u/s.153C - addition u/s 68 - HELD THAT - On scrutiny of documents and the nature of documents which are the basis for acquiring the jurisdiction and recording of satisfaction u/s.153C, if analysed deeply, it cannot lead to a satisfaction that these documents belong to the assessee or it is capable of drawing any inference that there is any element of undisclosed income which can be held as incriminating. At best it may be reckoned as pertaining to Assessee Company. If the documents were found from the possession of Shri N.K. Jain, then presumption is that the documents belonged to the said persons from whose possession the same was found. There has to be some prima facie reason and cogent material that the seized documents does not belong to the searched person but to someone else. Any statutory record or Company Law requirement documents are found from the possession of the professional of the company that does not meant it is a document belonging to the assessee company which can extrapolate to as incriminating. Had there been any document found from searched person indicating that assessee company has arranged some bogus entry or rotated some undisclosed income or any such similar transaction and that document belong to the assessee, then of course Assessing Officer can reach to his satisfaction that undisclosed income for that assessment year needs to be assessed for the assessment years falling within 6 years of section 153C. Nowhere it has been brought on record that there is any statement or disclaimer by Shri N.K. Jain that these documents does not belong to him or pertain to him or based on these documents any adverse inference can be drawn that there is an element of any undisclosed income belonging to or pertained to the assessee. The document which has been referred in the satisfaction note of the seized documents are all legal document in compliance with the company law and professional documents and as stated above, these documents does not indicate any undisclosed income or expenses. Even the ledger account and bank statement as mentioned in Annexure A-7 are duly disclosed in the audited accounts and nowhere is it indicating any undisclosed income not disclosed in the books of the assessee company or audited accounts. There is not a single document mentioned right from the Annexure A1 to Annexure A7 to point out that the share application money received by four companies were either non genuine or bogus or there is any material that these all are in the nature of accommodation entry. As concluded assessment cannot be interfered unless there is incriminating material discovered from the seized documents belonging to the assessee, and no additions can be made where the assessments are framed u/s.153C for unabated year. The seized documents must at least clearly point out that there is some undisclosed income, which here in this case, even for the sake of repetition, it is reiterated that none of the documents are in the nature of incriminating material so as to warrant any additions - the additions made by the Assessing Officer are beyond the scope of Section 153C r.w.s. 153A. - Decided in favour of assessee.

Issues Involved:
1. Quashing of assessment by CIT(A).
2. Recording of satisfaction in the case of the person searched.
3. Reliance on the decision in Manish Maheshwari vs ACIT.
4. Jurisdiction under Section 153C.
5. Incriminating documents and their relevance to unabated assessment years.

Detailed Analysis:

1. Quashing of Assessment by CIT(A):
The Revenue contended that the CIT(A) erred in quashing the assessment, which was deemed erroneous and untenable in law. The CIT(A) quashed the assessment order passed under Section 153C, stating that the jurisdiction assumed under this section was not in accordance with the law, as no satisfaction note was recorded in the case of the person searched, and the seized documents did not belong to the assessee.

2. Recording of Satisfaction in the Case of the Person Searched:
The CIT(A) held that no satisfaction was recorded in the case of the person searched, which is a prerequisite for initiating proceedings under Section 153C. The CBDT Circular No. 24/2015 clarified that even if the Assessing Officer (AO) of the searched person and the "other person" is the same, separate satisfaction notes must be recorded. However, the Supreme Court in Supermall Pvt. Ltd. held that if the AO of both the searched person and the other person is the same, one satisfaction note is sufficient, which was against the assessee's argument.

3. Reliance on the Decision in Manish Maheshwari vs ACIT:
The Revenue argued that the CIT(A) erroneously relied on the decision in Manish Maheshwari vs ACIT, where no satisfaction was recorded at all. The CIT(A) quashed the assessment based on the absence of a satisfaction note in the case of the person searched, in line with the principles laid down in the Manish Maheshwari case.

4. Jurisdiction under Section 153C:
The assessee contended that there was no jurisdiction under Section 153C as no books, documents, or valuables belonging to the assessee were seized from any person searched under Section 132. The documents found from Shri N.K. Jain, the Company Secretary, were argued to be in his professional capacity and not belonging to the assessee. The Delhi High Court in Pepsico India Holding P Ltd. and CIT vs. RRJ Securities Ltd. held that documents found in the possession of a professional do not necessarily belong to the assessee.

5. Incriminating Documents and Their Relevance to Unabated Assessment Years:
The assessee argued that the documents found were not incriminating and did not indicate any undisclosed income. The Supreme Court in Sinhgad Technical Education Society held that for unabated assessment years, additions can only be made based on incriminating material found during the search. The Delhi High Court in CIT vs. Kabul Chawla held that completed assessments can only be interfered with if incriminating material is found. The documents found were legal and professional documents, not indicating any undisclosed income, and therefore, no addition could be made for the unabated assessment year 2010-11.

Conclusion:
The Tribunal held that the documents found were not incriminating and did not belong to the assessee, thus quashing the proceedings under Section 153C. The additions made by the AO were beyond the scope of Section 153C read with Section 153A, as the assessment year 2010-11 was not pending and no incriminating material was found. The grounds raised by the assessee were allowed, and the Revenue's appeal was dismissed.

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