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TMI Blog2012 (4) TMI 335X X X X Extracts X X X X X X X X Extracts X X X X ..... NA, MR. JUSTICE R.V. EASWAR, JJ. For Appellant : Mr. O S Bajpai, Sr. Adv. with Mr. Piyush Kaushik, Adv. For Respondent : Mr. N P Sahni, sr. standing counsel R.V. EASWAR, J.: SSP Aviation Ltd., the petitioner herein, is a company based in Delhi mainly engaged in the business of real estate development. It was regularly filing returns of income under the Income Tax Act, 1961, hereinafter referred to the Act . In respect of the assessment years 2003-04 to 2008-09 it had filed returns of income. The relevant details are set out below in the form of a table: - Assessment Year Date of filing of Return Date upto which action could be taken u/s 143(2) i.e. date after which scrutiny assessments u/s 143(3) have become time barred 2003-04 31.12.2003 31.12.2004 2004-05 31.10.2004 31.10.2005 2005-06 29.10.2005 31.10.2006 2006-07 27.11.2006 30.11.2007 2007-08 30.10.2007 31.10.2008 2008-09 31.03.2009 30.09.2009 2. On 5th January 2009, there was a search under Section 132 of the Act of the Puri Group of Companies namel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Ltd. and M/s. Emaar MGF Land Pvt. Ltd. in the form of Escrow Agreement dated 08.08.2006. A perusal of these documents and other related information shows that M/s. SSP Properties Pvt. Ltd. acquired developmental rights from M/s. Puri Group in respect of 9.06 acres of land and subsequently transferred such rights in favour of M/s. Emaar MGF Land Pvt. Ltd. for a total consideration of Rs.86 cr. Against which it had already received on amount of Rs.44 cr. till 31.3.2008. In the light of above, I am satisfied that the above case is fit for assessment u/s 153C in accordance with the provisions of section 153A of the Income Tax Act. (sic) 1961 as the seized documents containing collaboration agreement dated 28.4.2006 and the assignment agreement dated 21.7.2006 mentioned above belong to M/s. SSP Properties Pvt. Ltd. (Now M/s. SSP Aviation Pvt. Ltd.) being a person other than the person where the search has been initiated. Hence, in order to assess/ reassess the income of this assessee, notices u/s 153C are hereby issued for assessment years 2003-04 to 2008-09. Sd/- DCIT, CC-18, New Delhi A copy of the satisfaction note as well as the Collaboration Agreement dated 28.4.2006 and the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner was incorporated as a company only on 8.1.2003. For the assessment years 2003-04 to 2006-07 and the assessment year 2008-09, the assessments were completed under Section 143(3) read with Section 153C as per the table set out below: Assessment Year Income Declaration (Rs.) Income Assessed (Rs.) 2003-04 Nil Nil 2004-05 Nil Nil 2005-06 Nil Nil 2006-07 Nil Nil 2008-09 Nil Nil In all the aforesaid assessment years, the assessee had incurred expenses which were shown in it profit and loss account but there was no income since there was no business activity. Normally, the expenses incurred by the petitioner should have been carried forward to the subsequent years but according to the Assessing Officer in the absence of any income during the above years those expenses were to be disallowed and since they were disallowed he assessed the total income at Rs.Nil for all the assessment years and also refused carry forward of any loss. 5. However, in respect of the assessment year 2007-08 there was a significant difference in the pattern of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sit would stand adjusted against the total consideration of Rs.86 crores. He further, noticed that the petitioner had received Rs.44 crores from MGF till 31.3.2008 against transfer of the development rights. In the balance sheet of the petitioner as on 31.3.2007, the entire amount of Rs.86 crores was shown as part of construction work in progress. According to the respondent, the petitioner had failed to explain why no income was recognised by it out of the total consideration of Rs.86 crores received from MGF. MGF was found to have claimed the amount as part of the cost of the project. According to him the profit on the sale of development rights had accrued to the petitioner in the previous year relevant to the assessment year 2007-08. Referring to the judgment of the Bombay High Court in the case of C D Kapadia Vs. CIT (2003) 260 ITR 491, he held that the entire amount of Rs.86 crores was taxable as the income of the petitioner for the assessment year 2007-08. 6. The petitioner had submitted before the respondent, in the course of the assessment proceedings, that the receipt from MGF was linked to the percentage of completion method and the profits from the transaction will be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... averments made in the writ petition, a seizure can only be made when the assets or documents represent any undisclosed income. It is contended that the balance sheets of the petitioner disclosed the receipt of the amounts from MGF for sale of development rights and therefore those amounts cannot be stated to be undisclosed income merely because the petitioner chose to follow the percentage of completion method of recognition of revenue. According to the petitioner if the receipt declared in the books of account cannot be described as undisclosed income, there can be no satisfaction as required by Section 132(1) nor can there be any satisfaction required to be recorded under Section 153C(1) of the Act. It is further contended that Section 153Cmay lead to harassing situations since the Assessing Officer has no option but to reopen the assessments for six assessment years. 9. On the above principal grounds, the petitioner contends that the seizure of the documents, the satisfaction recorded by the Assessing Officer under Section 153C(1) and the assessment orders passed by the respondent for the assessment years 2003-04 to 2008-09 have all to be struck down. 10. In support of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y filed appeals before the CIT(Appeals) and has availed of the alternative remedy. 13. Sections 153A to 153D are placed in Chapter XIV of the Act, which is titled procedure for assessment . Section 153A provides for the assessment in case of search or requisition. This section applies to a person in whose case a search is initiated under Section 132 or books of account etc. are requisitioned under Section 132A. The procedure prescribed under Section 153A is that the Assessing Officer shall call upon the assessee who is searched to furnish returns of income for six assessment years immediately preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made. The assessee, on receipt of the notice from the Assessing Officer, shall furnish the returns of income and thereafter the Assessing Officer is empowered to assess or re- assess the total income in respect of different assessment year falling within six assessment years. Now, a question may arise as to what would happen to the regular returns, if any, filed by the searched assessee for any of the six assessment years which are pending on the date on which the search was initia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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. 18. A reference to Section 158BD of the Act, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue. They have submitted to the contrary. It cannot be said that the seizure of the documents was unwarranted or contrary to law. As noticed above, Revenue has highlighted that finalization and audit of accounts was after the date of the search. The accounts for the year ended 31.03.2009 now relied upon by the petitioner, were finalized after the search on 05.01.2009. Seizure has to judged in the perspective and the facts known and within the knowledge when it was made. On that date, the Revenue was not in a position to know whether any income from the transaction had been discharged by the petitioner in its books of account for the year ended 31.03.2009. In the very nature of things, the warrant of authorization of the search under Section 132 could not have been issued on the footing that there was undisclosed income in the case of the petitioner simply because action under Section 132 was taken not against the petitioner, but against the Puri Group of Companies. Section 153C postulates that while conducting the search on the person in whose name the search warrant is issued under Section 132, some valuable article or books of account or document is seized, which does not belong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfied that they belong to the petitioner, forwarded then to the Assessing Officer having jurisdiction over the petitioner. This procedure followed by the Assessing Officer was strictly in accordance with sub-section (1) of Section 153C. There is no averment that the seizure or the forwarding of the document after duly reaching the satisfaction was a malafide action on the part of the respondent. The procedure followed was also in accordance with the statutory provision referred to above. 20. The other apprehension expressed by Mr. Bajpai, namely, that there is grave danger that even disclosed transactions/ income are likely to undergo a further scrutiny causing harassment to those persons whose assets or valuable articles or books of accounts or documents are found during the search conducted in the case of another person, may be justified to a limited extent, if facing an inquiry all over again can be justly described as harassment. There can be some inconveniences in a case where the income had already been disclosed by the other person who has not been searched. However, there is no cause for any apprehension that the income tax authorities will exploit the situation to hara ..... X X X X Extracts X X X X X X X X Extracts X X X X
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