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TMI Blog2014 (5) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... ng than the other 18 assessees in the cases of most of whom the Tribunal on the basis of the same satisfaction note has held the proceeding initiated in those case u/s 153C as invalid - In those cases also Annexures A-1 to A-10 were the subject matter, on consideration of which the Tribunal came to the conclusion that invocation of section 153C was not valid as no incriminating documents belonging to the assesee were found. The documents were not found from the possession of the present assesee nor these are in the handwriting of the assessee or its employee(s) - These were found from the possession of Shri R.K. Miglani and UPDA, there is no evidence of any receipt or payment of cash in respect of which addition was made - The word ‘belonging’ may be understood in the sense of ownership or something little lesser than ownership but of course more than mere reference of assesee on a documents found and seized from the possession of others without any corroboration - The documents noted in satisfaction to proceed u/s 153C do not make reference to any receipt or payment of cash and are not of any incriminating nature. There is no reference to any amount paid or received and as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long to the assessee a pre requisite u/s 153C for making an addition under this section and therefore void ab-initio, illegal and liable to be quashed. 6. That the Ld. AO has erred by relying on documents and statements of third parties Mr. R.K. Miglani and M/s. Radico Khaitan, without opportunity to cross-examine, and on surmises and remises totally alien to any cogent proof and in absence of proof of source of the generation of funds, and their absence either the identity of the so called beneficiary officials and politicians and without stating any reason as to why such payments were being made. 7. The Ld. AO has erred by relying of dumb documents, loose sheets, diaries and jottings of third parties even though they could not be relied upon to make any additions in the case of the assessee and stating that the assessee was part of the so called core-committee that is factually incorrect. 8. The Ld. AO has erred by relying on the disclosure made by M/s. Radico Khaitan before the ITSC, revised return of M/s. Balrampur Chini Mills Ltd. and information from laptop of Shri Ajay Agarwal of M/s. Radico Khitan. 9. The Ld. AO has erred by stating that the gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (in short UPDA) and at the premises of UPDA on 14.2.2006. Action u/s 133A of the Act was also taken at the premises of the assessee on 14.2.2006. Various incriminating documents were found and seized. Statements of various persons including Shri R.K. Miglani were also recorded u/s 132(4)/133A of the Act. 6. M/s. UPDA is a registered society formed by all the distilleries of UP for its welfare to jointly take up their cause with various authorities on different issues. During the course of search and survey, 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 Ltd. i.e. the assessee. The main allegation was that UPDA was collecting huge sum from its members which represented their unaccounted income and then through UPDA utilizing these sums for the payments to various authorities including politicians to further the business cause of its members. The documents seized from Miglani s residence and from the office of UPDA were regular accounts of money received datewise from the member distilleries from the financial year 2002-03 till the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 150 182 99.8 194.8 626.6 11. Kesar(Baheri) 419 317 176.3 245 1157.3 12. Daurala(DCM) 374 453 310.2 448.6 1585.8 13. Rampur 752 945 599.4 705.6 3002 14. SSL(Mansurpur) 463 607 374.8 591 2035.8 15. M. Meakins 202 334 204.2 275.6 1015.6 16. Lords(D.K. Modi) 582 616 404.9 486.9 2089.8 17. Balrampur 298 328 244.5 870.5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Financial Year Assessment Year Amount 2002-03 2003-04 Rs. 8,25,79,200/- 2003-04 2004-05 Rs.10,79,16,400/- 2004-05 2005-06 Rs. 5,17,62,721/- 2005-06 2006-07 Rs. 7,39,59,500/- 11. We will now deal with the issues raised in the appeals preferred by the parties hereunder. 12. At the outset of hearing the Ld. AR pointed out that assessment year 2000-01 is the first year wherein proceedings have been initiated u/s 153C of t he Act without recording satisfaction for the asstt. year 2000-01. Thus the assessment order for the assessment year 2000-01 in absence of satisfaction note is without jurisdiction. He pointed out that similar is the position for the assessment years 2001-02 and 2002-03. He submitted that in the assessment year 2000-01 the return was accepted and no addition was made. The Ld. AR submitted further that no incriminating material was found against the assessee hence assessment u/s 153C of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... note. Thus the assessment order for these three assessment years has been passed by the AO without its acquisition of jurisdiction. The Ld. AR submitted further that for all these years under consideration in the appeals, no incrementing documents was found to justify the additions made in the assessment framed u/s 153C read with section 153A of the Act. In support he placed reliance on the above cited decisions. 15. The Ld. DR on the contrary submitted that even if there is no material for all the six years assessment u/s 153A or 153C can be made. He submitted that provisions laid down u/s 153C of the Act be read with the provisions laid down u/s 153A of the Act. These provisions are different from the provisions laid down u/s 158BB of the Act. In support he placed reliance on the following decisions :- Shivnath Rai Harnarain (India) Ltd. vs. DCIT 117 ITD 74 (Delhi) SSP Aviation Ltd. vs. DCIT (2012) 346 ITR 177 (Delhi) Orissa State Civil Supplies Corporation Ltd. vs. DCIT 259 ITR 20 (Cuttack) 16. Ld. DR pointed out further that the documents found in search belonging to the present assessee. In the above cited connected cases relied upon by the Ld. AR an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - There is no dispute that the satisfaction was recorded by the Assessing Officer qua the documents found and seized during the course of the search. Only dispute is whether in the facts and circumstances of the case the books of account or the documents seized can be said to be belonging to Saraya Industries or not. Income Tax Act does not define the words/phrase 'belonging to'. Careful perusal of the provisions would show that by necessary implication the document should belong to someone other than the person searched u/ s 132 of the Act. It is quite possible that a document may belong to more than one persons in which situation AO to meet the requirements of the law after recording the satisfaction may part with the true copies of the said document by handing them over to other Assessing Officers. One such illustration is the case decided on 07-11-2011 by the Mumbai Bench of the Tribunal in the case of Guruprerna Enterprises v. ACIT (ITA No.255, 256, 257/Mum/211 ITA No. 255, 256, 257/Mum/211) where a document being the joint venture agreement found from the premises of a 3rd person (other than the one in whose case action u/ s 153C was taken to which even the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iry which is to be conducted in the manner prescribed by sec.153C. 4.3 To find out the answer to the aforesaid posed two questions (referred in para 4.1 above) it will be relevant to go through the documents referred to in the satisfaction recorded by the Assessing Officer whereby he viewed that the documents referred to therein belong to persons referred to in the Note other than the person actually searched u/ s 132 of the Act. In this context, it would be relevant to go through the following documents referred to in the Satisfaction Note. The documents are enclosed herewith as Annexure A-2 to this submissions. SN of A-2 Document No. Description of the document 1. A-2/72 Though unsigned and blank but clearly belongs to 5 persons i.e. Saraya Industries, Lords, NICL, Rampur 2. A-2/67 It gives details of 5 Lead Distilleries and attached Distilleries of Saraya Industries, Lords, NICL, Rampur. Clearly document belongs to five persons including the Assessee under consideration i.e. Saraya Industries. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch for November, 2005 (page 14). Documents belongs to 19 persons including Saraya Inds. 24-26. A-1/25,27,29 Details of Total Excess of Distilleries including the assessee's distilleries Documents belong to persons mentioned therein including the assessee. 27. A-1/66 Fax message of Saraya Industries showing Saraya's position. The document exclusively belongs to Saraya Industries. 28. A-1/114 Total Ajc upto date (upto Feb 05) duly signed by R.K. Miglani of UPDA Vishal Srivastava Atul K. Singh of Lords, H.R. Wadhwa of Saraya. Clearly the document jointly belongs to 4 parties including the assessee, Saraya Industries. This document is similar to the document (a joint venture agreement signed by three parties) considered by the Mumbai Bench of the Tribunal in the case of Guruprerna Enterprises v. ACIT {IT A Nos. 256, 257, 258/Mum/2010) 29. A-1/129 Document bearing 'Saraya 2003-04' clearly shows that this document exclusively belongs to Saraya Industries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PDA but of its members. Looking from this angle under no circumstances the documents would have shown- any income discussed therein pertaining to UPDA. The documents so found would have shown income only of its members and when it was so the documents have to be held to be belonging to the member distilleries and not to UPDA. Since, the payments routed through the UPDA these have partly been considered in the hands of UPDA following the double entry system. Merely because in the hands of the UPDA also these documents have been considered it does not mean that these documents cease to belong to members of the Association including Saraya Industries. 5.1 Now the question that arises is as to whether the present case is covered by the decision of the Tribunal in the case of National Industrial Corporation Ltd others decided by the ITAT vide order dated 23-11-2012 as has been contended by the Appellant. In this connection, it is submitted that none of the above documents find mention in the order of the Tribunal which goes to show that as such this decision does not apply. In the present case we have good number of documents which are clearly and exclusively belonging to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth the complete ownership and ownership which is less than perfect legal title. It viewed that there should be some limited ownership of interest to say that they belong to the assessee. In this regard support has been taken also from the decision of Hon ble Gujarat High Court in the case of Vijaybhai N Chandrani vs. ACIT 231 CTR 474 (Guj). Thus it would be noticed that the Bangalore Bench for deciding the matter placed reliance on its decision in the case of P. Srinivas Naik and also drew support from Vijaybhai N Chandrrani case. Facts of these two cases were entirely different. The facts of t eh present case are similar to the facts in the case of Guru Prerna Enterprises (supra) wherein the Tribunal has held / observed that it has gone through seized material available in paper book of the assessee and specifically assessee s paper book (page No. 105 to 190) of Kessaar Enterprises for asstt. year 2003-04 . The Tribunal remarked that no doubt even possession of any interest less than of full ownership could be signed by that word. The Ld. DR again referred contents of para No. 18 of the orders of the Tribunal in the case of NICL and others (supra) with this submission that the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st tallies. Thus there is a direct evidence to support that document found in Miglani s house belongs to the assessee. On the finding of the Tribunal in the case of NICL and others that in absence of any fax message any e-mail or any audio message recorded from telephone conversation it could not be said that the documents belonging to the assessee were found , the Ld. DR submitted that the finding was based upon its understanding that probably in this case there was no fax message or any e-mail or any audio message were there, whereas in the case of present assessee there are good number of documents which have emanated from the assessee alone. In this regard Ld. DR invited our attention to the documents marked as A-2/54-57 and A-1/66 which are e-mails which go to show that these documents belong to the assessee only. On the observation of the Tribunal in para No. 19 in the case of NICL others that the UPDA is a society where all the assesses are members and that its memorandum of association does not provide that excess of income shall be transferred to members of the society and that anything belonging to the society cannot be said to be belonging to its members as all these a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nexure A - 1 to A - 10 and all these pages were taken into consideration by the Tribunal in the case of NICL and others (supra). 21. In the context of various annexures forming part of satisfaction note, the Tribunal vide para 8 of its order took note of contention of the parties that these annexures were not in the handwriting of directors or any officials of the concerned companies and there is no corroborative evidence regarding contents of these annexures. He also referred contents of para Nos. 18, 19 and 20 of the order of the Tribunal regarding finding and conclusion in the context of the common satisfaction note in terms of provisions of section 153C. The finding of the Tribunal in these paragraphs is self evident that all the relevant annexures forming part of satisfaction note were considered by the Tribunal. 22. The Ld. AR submitted further that Ld. DR has enclosed various documents as part of the written submission alongwith various annexures it was proposed that order of the Tribunal was not in correct perspective and appeals in the present case are required to be considered independently and on stand alone basis. Opposing this submission of the Ld. DR the Ld. AR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther any such addition is emanating from these annexures. These documents are irrelevant and out of context as no addition has been made on the basis of these documents. The Ld. AR submitted further that in conformity with the satisfaction note even the AO has made no addition for the assessment years 2000-01, 2001-02 and 2002-03. The Tribunal cannot go beyond satisfaction note as issue of jurisdiction is related to provisions of section 153C. The limited issue before the Tribunal is whether annexure referred to in the satisfaction note belonging to the assessee. In support he placed reliance on the latest decision of the Tribunal in the case of DSL Properties (Pvt.) Ltd. vs. DCIT (supra) holding that in the absence of satisfaction u/s 153C, the consequential assessment proceedings are illegal and without jurisdiction. 24. The Ld. AR submitted that no document at all was found for the above 6 years under consideration, to initiate proceedings u/s 153C of the Act section 153A is only a missionary provision. Satisfaction is to be recorded pertaining to specific assessment year to initiate the proceedings. The Tribunal in the above cited connected cases has held that the document d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Superior/ITRC 6 46 34.7 233.6 320.3 9. Simbholi 298 472 278.5 583.1 1631.6 10. Cooperative 150 182 99.8 194.8 626.6 11. Kesar(Baheri) 419 317 176.3 245 1157.3 12. Daurala(DCM) 374 453 310.2 448.6 1585.8 13. Rampur 752 945 599.4 705.6 3002 14. SSL(Mansurpur) 463 607 374.8 591 2035.8 15. M. Meakins 202 334 204.2 275.6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A of the Act. UPDA is a registered society formed by the distilleries of UP for its welfare to jointly take up their cause with various authorities on different issues. The assessee was one of the active members of the association. These documents seized from Miglani s residence and from the office of UPDA were regular accounts of money received datewise from the financial year 2002-03 till the date of search i.e. 14.2.2006 and contained basis of determination of this contribution and manner of spending the money. On the basis of these documents and statements of Shri Miglani the revenue came to the conclusion that contribution of each member was fixed on the basis of country liquor produced by each distillery. These collections were on regular basis and were given to various officials and politicians which basically represented illegal payments. The whole activities were coordinated through select committee known as core Committee and Shri Miglani as Secretary General maintained the regular accounts. The revenue also observed that the assessee has paid a sum of Rs. 3207.5 lac during the financial years 2002-03 to 2005-06 relevant to the assessment years 2003-04, 2004-05, 2004-05 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry 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)/133A 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 reveals that illegal payments were made by various Distilleries to various public servants. The UPDA acted as the nodal agency for making these illegal payment. The total of such illegal payments which are inadmissible expenditures works out to Rs. 246 crore as per details given hereunder {as understood from annexure A-1 A-2 seized from the residential premises of Shri R.K. Miglani} :- S.No. Name of the Distillery 2002-03 2003-04 2004-05 2005-06(till Jan.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 125 149.7 308.8 604.5 17. Superior/ITRC 6 46 34.7 233.6 320.3 18. ****Majhola 72.5 72.5 TOTAL 59.80Cr. 75 Cr. 46.10 Cr. 65.23 Cr. 246.076 Cr. So, from the above chart, the total of such illegal payments in respect of M/s. Saraya Industries Limited, B-2, B-3, Surya Plaza, New Friends Colony, New Delhi, which are inadmissible expenditure works out to Rs. 3207.5 lakh as per details given hereunder :- S. No. Name of the Distillery 2002-03 2003-04 2004-05 2005-06 (till Jan.) Total(in Lakhs 1. Saraya Industries Limited 945 1045 527.5 *690 (Saraya +Balrampur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lkhani Distilleries, Daurala Distillery, M/s. Lords Distillery have made such types of payments. (d) In most cases, expenses on empty bottles have increased disproportionately since F.Y. 2002-2003. (e) Some of the distilleries like Saraya are paying inflated transportation charges if compared with other distilleries. In view of the above facts based on seized documents and coupled with the statements of Shri R.K. Miglani, Secretary General of UPDA, I am satisfied that the documents seized from the residence of Shri R.K. Miglani belong to the above mentioned persons also. Hence, action u/s 153C of Income Tax Act, 1961 is called for in the case of above noted person who has incurred illegal expenditure as mentioned above. Photocopies of Annexures A-1 to A-10 seized from the residence of Shri R.K. Miglani and Annexures A-1 to A-8 impounded from the office of UPDA are being enclosed. Annexure A-9 impounded from the office of UPDA is a hard disc. Assessing Officers requiring copies thereof may obtain it from the undersigned. Also find enclosed statement of Shri R.K. Miglani, Secretary General UPDA recorded u/s 132 (4) and u/s 133A on 14.2.2006. 30. From t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied 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 said 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 experience and that person was searched, can the document be considered as belonging to the assessee. It may give information to the Income Tax Department for investigation. It lead to reopening of assessment but those details cannot be a gospel truth and cannot be considered as documents belon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ownership or something little lesser than ownership but of course more than mere reference of assesee on a documents found and seized from the possession of others without any corroboration. These documents noted in satisfaction to proceed u/s 153C do not make reference to any receipt or payment of cash and are not of any incriminating nature. Much emphasis has been put by the Ld. DR on the seized material marked as annexure A1/114 alleging that it is total account uptodate (upto Feb 05) duly signed by R.K. Miglani of UPDA, Vishal Srivastave Atul K Singh of words and H.R. Wadhwa an employee of Saraya clearly jointly belonging to 4 parties including the assessee, Saraya Industries. He argued that this document is similar to the document (a joint venture agreement signed by these parties) considered by the Mumbai Bench of the Tribunal in the case of Guruprena Enterprises vs. ACIT (supra). Perusal of this document shows that there is no reference to any amount paid or received and as such the document is not relevant even in the context of satisfaction note recorded by the Assessing Officer. Further the said document was also considered by the Assessing Officer in the case of M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal has specifically observed that these documents do not belong to various parties referred to in the said document. We do not find reason to deviate from the decision of Tribunal in those similar cases of NICL Ors. (supra) relied upon by the Ld. AR. Undisputedly these documents were not found from the possession of the assesee nor these documents are in the handwriting of the assessee or its employees. We thus following the decision of Tribunal in the case of similarly placed assessees in the cases of National Industries Corporation Ltd. vs. DCIT others (supra) hold that the above mentioned documents marked as Annexure A-1, A-2, B-2 and B-3, the subject matter of the satisfaction recorded by the AO to initiate proceedings u/s 153C against the present assessee do not belong to the assessee to justify initiation of proceedings u/s 153C of the Act against the assessee. 33. And above all the UPDA, an independent assessee in its own right and capacity has already been assessed with the similar income on which the revenue also intends to make the assessment in question in the hands of the assessee. The issue on the validity of the initiation of proceedings u/s 153C of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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