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TMI Blog2013 (11) TMI 219X X X X Extracts X X X X X X X X Extracts X X X X ..... 153A. In the abovementioned case, no books of account nor any incriminate documents pertaining to the appellant were seized when a search was conducted in the residential premises of Sri Miglani and that no books of account or documents or assets seized or requisitioned were handed over to the assessing officer having jurisdiction over the appellant - Thus, the AO, was not within his realm for initiation of proceedings u/s 153A r.w.s. 153C of the Act in the case of the appellant. Query that UPDA is a society where all the assessees are members. According to the principle of mutuality, why the details prepared by the Secretary of the Society be not construed as belonging to all the members of the society. To this query, it was contended by the learned counsel for the assessee that UPDA is an independent taxable entity. It is not a members club and not a mutual benefit society. It is constituted under a separate Memorandum of Association. The Memorandum of Association does not provide that excess of the income shall be paid or transferred directly or indirectly to the members of the society. It also does not provide that on dissolution of the society, assets of the society sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53C/A of the Act especially when no incriminating documents were found during the search proceedings in respect of the disallowed item. 4. That on the facts and in the circumstances of the case and in law the Learned Commissioner of Income Tax (Appeals) has erred in not holding that Book Profits assessed u/s 115JA ought to have been Rs.37, 168/- as against Rs.12,63,68,811/- assessed in the assessment framed u/s 153C/A of the Act. 5. That on the facts and in the circumstances of the case and in law the Learned Commissioner of Income Tax (Appeals) has erred in not holding that provision of Rs.16,70,095/- (correctly Rs.1,67,095/-) made for interest payable as per Allahabad High Court order on additional levy sugar price realised in earlier years is a provision for ascertained liability and is not to be added back under Clause 'c' of Explanation to Second Proviso to Section 115JA(2) of the Act. Without prejudice, the CIT (A) ought to have held that the correct figure of provision was Rs.1,67,095/- as against Rs.16,70,095/- adopted by the A.O. 6. That on the facts and in the circumstances of the case and in law the Learned Commissioner of Income Tax (Appeals) has erred in not hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Taxable Book Profit Rs.12,63,68,811/- 5. While passing the assessment order, the Assessing Officer made the following observations:- "1. The assessee company filed its original return on 29-11- 2000 declaring Nil income after set off of brought forward losses. This return was processed u/s 143(1) on 28.03.2001 at Nil income. 1.1 Proceedings u/s 153-C read with section 153A were initiated in this case vide notice dated 11-12-2006 issued under section 153A read with section 153C of the Act. Reasons for taking action u/s 153C are recorded in subsequent paras. In response to the notice u/s 153A/ 153C the assessee filed a Writ Petition under Article 226/ 227 of Constitution before the High Court of Delhi at New Delhi on 18-01-2007 challenging above notices u/s 153A read with section 153C of the Act for the block assessment years 2000-01, 2001-02, 2002-03, 2003-04, 2004- 05 and 2005-06. The Hon 'ble High Court vide their order dated 19-01-2007 (annexure-A pages 1-3) directed that no final order under section 153C read with Section 153A of the Income-tax Act be passed till next date viz. 05-03-2007. On 10-05-2007 the Hon'ble Court passed order (annexure-A pages 4-6) that interim ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Miglani were recorded u/s 132(4)/133A of the Act. 1.4 M/s UPDA is a registered society formed by all the distilleries of UP for its welfare to jointly take up their causes with various authorities on different issues. 1.5 Main allegation was that UPDA was collecting huge sums from its members which represented their unaccounted income and then through UPDA utilizing these sums for the payment to various authorities including politicians to further the business cause of its members. 1.6 During the searches, large number of documents were found and seized from various premises including that of M/s Radico Khaitan, office of UPDA, residence of R.K. Miglani and office of M/s Saraya Industries (which was also one of the active members of the association) which prima-facie confirmed the above allegations. 1.7 These documents seized from Miglani's residence and from the office of UPDA were regular a/cs of money received date- wise from the member distilleries from the Financial year 2002- 03 till the date of search i. e. 14.02.2006, basis of determination of this contribution by each distillery and manner of spending this money. As per these documents and statements of Sh. Migla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Modi) 17 Balrampur 298 328 244.5 870.5 18 Central 22 44 32.4 98.4 19 Majhola 72.5 72.5 2.1 Therefore, from the above chart it is clear that M/s DCM Shriram Industries Ltd. has paid a sum of Rs.1585.8 Iakh during the financial years 2002-03, 2003-04, 2004-05 2005-06 relevant to the assessment years 2003-04, 2004-05, 2005-06 2006-07. 2.2 The ACIT Central Circle-4, New Delhi recorded a satisfaction as per the provisions of Section 153A on 1.12.2006 that action u/s 153C of the Act was called for in this case as the assessee had made unaccounted payments/incurred illegal/ unaccounted expenditure as mentioned above. He delivered the satisfaction note along with certified, photo copies of the seized documents to Dy. Commissioner of Income Tax, Central. Circle-19, New Delhi who is the Assessing Officer of the assessee being the person other than the parson searched, (Copy of the satisfaction recorded by the ACIT Central Circle 4, New Delhi is enclosed with this order as per Annexure-A Pages 7-10). 2.3 On receipt of the above, the records were examined and the satisfaction was also recorded by this office on 11.12.2006 that action u/s 153C o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Courts. This submission of the assessee has already been discussed in details in the foregoing paragraphs and needs no further elaboration." 6. By virtue of the impugned order, the Ld. CIT (A) cancelled the assessment order, observing thus:- "I have considered the assessment order argument of Ld. AR. The impugned order is based entirely on same facts on which hon'ble ITAT, Delhi has given decision that document Seized from the residence of Sh. R.K. Miglani, Secretary General of UPDA does not belong to 5 Member of UPDA. Appellant is also a member of UPDA. Section 153C was invoked in all members of UPDA on the basis of Material Seized evidence gathered from the residence of Sh. M.K. Miglani during Search Action under See 132. In case of Five Members namely M/s National Industrial Corporation Ltd., M/s Kesar Enterprise Ltd., M/s Sir Shadi Lal Enterprises, M/s Mohan Mekins Ltd., M/s Lords Distillery Ltd., for various Assessment years; Hon'able ITAT, Delhi has given the finding that document seized evidences gathered from the residence of Sh. M.K. Miglani during search does not belong to Members of UPDA. Present appellant is also a member of UPDA. Basic fact remains the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ec. 153C of the Act was issued and served upon the assessees. 12. In order to resolve this controversy, it is imperative upon us to take note of section 153C of the Act, satisfaction note of the Assessing Officer, Central Circle-4, New Delhi who has the jurisdiction over the searched persons and the satisfaction of the Assessing Officer in NICL or Kessar Enterprises exhibiting as to how they have formed the opinion before the issuance of a notice under sec. 153C of the Act. They read as under : "153C. 89[(1)] Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircle-19, New Delhi Sir, SUB: - SATISFACTION NOTE FOR ACTION U/S 153C OF INCOME TAX, ACT, 1961 IN THE CASE OF MIS. KESAR ENTERPRISES LIMITED, ORIENTAL HOUSE,7, JAMSHADJI TATA ROAD, CHURCH GATE, MUMBAI APPEARING IN THE DOCOMENTS SEIZED IN MIS. RADICO KHAITAN GROUP OF CASES - REGARDING It has come to my knowledge that you exercise jurisdiction over the case of M/s. Kesar Enterprises Limited. Search and seizure actions under section 132 of I.T. Act, 1961 were taken on M/s Radico Khaitan Limited group of cases and also at the residence of Shri R.K. Miglani, Secretary General of UPDA on 14.2.2006. Simultaneously a survey u/s 133A of the I.T. Act, 1961 was carried out at the office of the UPDA (Uttar Pradesh Distillery Association). Various incriminating documents were found and seized therefrom. Action u/s 153A has been initiated against, various persons including M/s Radico Khaitan Ltd, and Shri R.K. Miglani. During the course of search various documents were seized / impounded and statements u/s 132(4) / 133 A were recorded including those of Shri R.K. Miglani. The scrutiny of incriminating documents found at the residence of Shri Miglani and also from the office of UPDA revea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he illegal payment amount has been calculated separately, but thereafter, it has been clubbed. *** For M/s Mohan Meakins Group also the Lucknow and Ghaziabad Distilleries are clubbed, though the major production / illegal payments come from Lucknow Distillery operations. ****M/s Majhola Distillery started making illegal payments in the F.Y. 2005-2006. These illegal payments to public servants are fixed on the basis of monthly production/sales of different distilleries. The-total illegal payment amount is settled with the public servants and then this amount "is divided proportionately on the basis of production / sales of different Distilleries. These figures of production / sales reflected in the papers impounded/seized from ITI UPDA headquarters and the residence of its Secretary General Shri R.K. Miglani, in fact, tallies with the actual production / sales shown by different distilleries in their books of alc, which, in a way indicate that these papers depict the illegal payments made and are not imaginary papers. These distilleries have adopted different methods for siphoning off / generation of this illegal payment amounts. Some of the instances noticed are as under :- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered by him reads as under : "SATISFACTION NOTE FOR INITIATING ACTION UNDER SECTION 153C OF INCOME TAX ACT 1961, IN THE CASE OF M/S. KESAR ENTERPRISES UMITED, ORIENTAL HOUSE, 7, JAMSHADJI TATA ROAD, CHURCH GATE, MUMBAI BASED ON APPRAISAL REPORT THE DOCUMENTS SEIZED / IMPOUNDED IN THE CASE OF SHRI R.K. MIGLANI. AND M/S UTTAR PRADESH DISTILLERY ASSOCIATION. Search and seizure action under section 132 of the Income- tax Act, 1961 was conducted on M/s Radico Khaitan Ltd. Group of cases on 14.02.2006. M/s Radico Khaitan Ltd. is engaged in the manufacture and sale of IMFL. It is the second largest manufacturer of IMFL in India and a leading manufacturer of Extra Neutral Alcohol. It also manufactures Rectified Spirit and Anyhydrous Alcohol or Ethanol or Gasohol. Simultaneously, search and seizure actions under section 132 of LT. Act, 1961 were also carried out at the residence of Shri R.K. Miglani, Secretary General of UPDA on 14.2.2006. Further, a survey u/s 133-A of the LT. Act, 1961 was also carried out at the office of the UPDA (Uttar Pradesh Distillery Association). Various incriminating documents were found and seized/impounded and statements u/s 132(4) /133A were recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Miglani and annexure A-I to A-8 impounded from the premises of UPDA}. Financial year 2002-03 2003-04 2004-05 2005-06 Total Amount paid 419 317 176.3 245 1157.3 (in lacs) The collection of these, unaccounted payments to public servants / persons / agencies are fixed on the basis of monthly production/sales of different distilleries. The total unaccounted payment amount is settled with the public servants / persons / agencies and then this amount is divided proportionately on the basis of production/sales of different Distilleries. These figures of production/sales reflected in the papers seized from the residence of Shri R.K. Miglani supported by evidence in documents impounded from UPDA office, in fact, tally with the actual production/sales shown by different distilleries in their book of a/c, which, in a way indicate that these papers depict the actual unaccounted payments made by the Distilleries. For example a lap top computer pertaining to Shri Ajay Agarwal, GM (Accounts) of M/s . Radico Khaitan was seized from Rampur during the search operations found that some of the pages containing the details monthly bribe payments for April to July, 2003 (Annexure"3d") matched wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these papers relate to the payment/contribution made by various members of UPDA periodically to the persons / agencies mentioned in my answer to Q No.9. Q. 12 ................................... Ans....................................... Q. 13 ................................... Ans........................................ Q. 14. I showing you pages 101 and 103 of Annexure A-I which have "Thakur A/c" written on each of them. Please tell who is Thakur and on what a/c the payments have been ade/due to him? Ans. I do not know who is Thakur. However, these papers must have been received from one of the members of the UP DA. I am unable to recollect the name of the member. These transactions pertain to payment made /due to Sh. Thakur. Q 15 I am showing you pages 43, 44 45 of annexure A-2. Please explain the nature of transaction on these papers? Ans : Page 43 and Page 45 are typed details of transaction recorded on page 44 and 46 respectively. The transactions recorded on page 43 45 are amount of money paid to various offices / officers of the Govt. Deptt. (Excise) Q 16 I am showing you pages 72 to 75 of Annexure A-2. Please explain the nature of transaction of these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re in the case of DCIT vs. United Spirits Ltd., Bangalore vide ITA Nos. 1375 to 1378/Bang/2010 dated 13.01.2012. The satisfaction recorded by the Assessing Officer who has jurisdiction over the searched persons is a common satisfaction in respect of nineteen distilleries. Similar assessment orders were made in the case of Central Distillery Breviaries Ltd. mentioned at Sr. No.16 of the satisfaction note. Learned CIT (Appeals), Bangalore has held that no material belonging to the assessee was found which authorized the Assessing Officer to initiate the proceedings under sec. 153C of the Act. The order of the Learned CIT(Appeals)-VI, Bangalore dated 27.9.2010 was challenged before the ITAT in ITA Nos.1375 to 1378/Bang/2010 for assessment years 2002-03 to 2005-06 (supra). The ITAT has dismissed the appeals of the revenue. Thus, one of the contentions raised by the learned counsel for the assessee is that the issue in dispute is squarely covered in favour of the assessee by the order of the ITAT which has interpreted and construed the same satisfaction note. In this background of fact, we deem fit appropriate to take note of the findings recorded by the ITAT, Bangalore. It reads as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r valuable article or thing or books of account or documents seized or requisitioned belongs to belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the assessing officer having jurisdiction over such other person and that assessing officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A". However, in the present appellant's case, no books of account nor any incriminate documents pertaining to the appellant were seized when a search was conducted in the residential premises of Sri Miglani and that no books of account or documents or assets seized or requisitioned were handed over to the assessing officer having jurisdiction over the appellant, but, only "(Para 3 of asst. order) 3....A satisfaction note for initiation of action u/s 153C/148 in the case of CBDL was also received from the DCIT, CC-19, New Delhi...." Thus, the AO, in our considered view, was not within his realm for initiation of proceedings u/s 153A r.w.s. 153C of the Act in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be taken against that person. In the instant case, we are satisfied that books of account or documents do not belong to the assessee and, therefore, the AO was not justified in initiating action under section 153A read with section 153C of the Act........" 8.1.4. Incidentally, the earlier Bench had, in the case of ACIT V. Shri Lakshman B Tukral in ITA Nos. 897 to 902/Bang/2007 dated 11.2.2011, echoed a similar view thus: "8.5. In an overall consideration of the facts and circumstances of the issue as deliberated upon - judicial as well as on merits - in the foregoing paragraphs and in conformity with the findings of the jurisdictional Hon'Ble Bench as well as the Hon'ble Gujarat High Court cited supra, we are of the firm view that when the conditions precedence for issuance of notice u/s 153C r.w.s. 153A were not fulfilled, as rightly ruled by the Hon'ble Gujarat High Court, any action taken u/s 153C of the Act stand vitiated...." 8.1.5. On an identical issue, the Hon'ble High Court of Gujarat in the case of Vijaybhai N Chandrani v. ACIT reported in (2010) 231 CTR 474 (Guj) ruled in a similar way thus: "13. Thus, a condition precedent for issuing notice under section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -04. All these papers are also placed in the paper books of other assessees. Learned CIT (Appeals) has also reproduced some of the seized material in the impugned orders, particularly, in the case of NICL and Kessar Enterprises. 17. According to the Learned CIT(Appeals), operating force of the expression "belonging to" is something more than the idea of casual association. It involves the notion of continuity and indicates one more or less intimate connection with the person over a period of time. It cannot both complete ownerships or limited ownership of interest, which may be less than the absolute legal title. Probably, learned first appellate authority has construed this meaning on the basis of the meaning explaoned on this expression in the judicial dictionary. This expression has been explained as under: "Belong The world "belong" in Bombay Municipal Boroughs Act denotes ownership. [Borough Municipality of Ahmedabad V. Govt of Province of Bombay ILR 1942 Bom 463, 201 IC 329, 15 RB 66, 64 Bom LR 35, AIR 1942 Bom 183]. Mere possession, or joint possession, unaccompanied by the right to, or ownership of property does not amount to Rs. belong'. [CWT v. Bishwanath Chatterjee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andwriting of Mr. Miglani. He is not the employee of any of the assessees. Accordingly to our understanding, the presumption of ownership of document could be attached with the person who authored it or with whom it was found i.e. the person who possessed it. All the documents relied upon by the revenue were not emanating from the books of the assessee or in the handwriting of any employee of the assessee. We could appreciate the case of the revenue if it was able to lay its hands on any forwarding letter i.e. chit etc. written by the assessee while handing over the money to UPDA. Any fax message, any e- mail or any audio message recorded from the telephone conversation. Had any such material was found then it could be Rs. said that the documents belonging to the assessee were found. The material emanating from the alleged compilation of details from Mr. Miglani can be an information pertaining to the assessee disclosing the details of income or expenditure but that cannot be a document belonging to the assessee. It can be explained with a simple example, suppose an ex-employee of a concern who has a knowledge of account makes extra polation of the accounts on the basis of his expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Distillers Association (UPDA) do not belong to the Members of UPDA and that no assessment u/s 153-C of the IT Act can be framed in their cases. The Ld. CIT (A) found the present assessee also to be a member of UPDA. The department has not been able to dispute before us these findings of the Ld. CIT (A). The ld. counsel for the assessee has pointed out that in 'National Industrial Corporation Ltd.' (supra), in the table at page 18 of the Tribunal order, the assessee's name occurs at item 6 of such table [the entry in column 2, i.e., Name of Distillery, is 'Daurala (DCM)', which, according to the ld. Counsel for the assessee, and not disputed by the ld. DR, is the distillery of the assessee company], in the satisfaction note of the Assessing Officer, Central Circle-4, New Delhi, for action u/s 153-C of the IT Act, in the case of M/s Kesar Enterprises Ltd., Mumbai, appearing in the documents seized in the M/s Radico Khaitan group of cases. As per this satisfaction note, the assessee was one of the persons named in the aforesaid table, who had made such illegal payments. Also, as per para 1.3 of the assessment order, search was conducted on the M/s Radico Khaitan group of cases and al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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