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TMI Blog2015 (11) TMI 1307X X X X Extracts X X X X X X X X Extracts X X X X ..... elong to the present assessee and on this ground also, the validity of reasons recorded comes within the teeth of proposition laid down in the case of Pepsico Holding Pvt. Ltd. (2014 (8) TMI 898 - DELHI HIGH COURT) and Pepsi Food Pvt. Ltd. vs CIT [2014 (8) TMI 425 - DELHI HIGH COURT]. Respectfully following the proposition laid down by Hon'ble Jurisdictional High Court, we are inclined to hold that the reasons recorded for action u/s 153 of the Act and issuance of notice under the said provision was not only bad in law but void ab initio which cannot be held as sustainable and consequently, we quash the same. Accordingly, C.O. of the assessee is hereby allowed. Addition on account of interest free loan & advances - CIT(A) deleted the addition - Held that:- CIT(A) placing reliance on the judgment of Hon’ble Delhi High Court in the case of SSP Aviation Ltd. vs DCIT (2012 (4) TMI 335 - DELHI HIGH COURT) held that the impugned addition based on disallowance of interest does not relate to emanating from the allegation of suppression of sales or receipt of unaccounted cash in sale of flats. Further, the first appellate authority also noted that the advances made to these persons/entities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation was conducted on 9.9.2010 in Amrapali Group of cases. Subsequently, a notice u/s 153C of the Act was issued on 12.4.12 to the present assessee and in response to which the assessee filed a letter stating that the return declaring income of ₹ 1,01,96,580 filed on 30.09.2009 may be treated as filed in response to the said notice. Further, notice u/s 142(1) along with questionnaire on 8.2.2012 and 7.9.2012 and another notice u/s 143(2) of the Act was issued on 7.9.12. The Assessing Officer vide assessment order dated 18.3.2013 assessed taxable income of the assessee by making two additions viz. first addition on account of bogus purchases and second addition on account of notional interest disallowed from expenditure claimed by the assessee under the head of interest on term loan. The assessee preferred an appeal before the CIT(A) agitating the validity of notice u/s 153C of the Act as well as on merit agitating the additions made by the assessee. The CIT(A) granted relief to the assessee on both the grounds on merit and deleted both the said additions. However, the first appellate authority dismissed the legal ground of the assessee upholding the validity of notice u/s 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been recorded on the basis and contents of the said satisfaction note does not express any fact that any document or other article belonging to the assessee was recovered during search and seizure operation. Ld. AR further pointed out that firstly the Assessing Officer of the searched person has to hold that the documents etc. seized during the seizure operation belongs to or belong to the other person, other than the person searched is a prerequisite and in absence of such satisfaction proceedings u/s 153C of the Act cannot be initiated against such other person. 4. Learned counsel of the assessee further referred to his written synopsis and submitted that the first requirement of law is that the Assessing Officer of the searched person is required to rebut appeal presumption u/s 132(4A)(i) and u/s 292C(1)(i) that seized documents do not belong or belongs to the searched person and then the Assessing Officer of the searched person has to draw an inference as to whom the seized documents belong to the person other than the person searched. Ld. AR further contended that in the case of Pepsi Food Pvt. Ltd. vs ACIT reported as (2014) 52 Taxmann.com 220(Delhi), the Hon'ble Jurisd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecording satisfaction as per section 153C of the Act and merely a chart showing details of projects of Amrapali Group cannot be held as belongs to or belong to the present assessee company. 7. Further, ld. AR also placed reliance on the recent judgment dated 10.7.2015 of Hon'ble High Court of Madhya Pradesh in the case of CIT vs Mechmen passed in I.T.A. No. 44/2011 and other related appeals and contended that when no satisfaction note has been recorded by the Assessing Officer of the other person before issuing notice u/s 153C of the Act and none of the papers belong to or belongs to the assessee have been found during search and seizure operation, then the notice u/s 153C of the Act and none of the papers belong to or belongs to the assessee have been found during search and seizure operation, then the notice u/s 153C of the Act cannot be held as valid assumption of jurisdiction and all proceedings in pursuance thereto should be held as bad in law and void ab initio. 8. Ld. AR further contended that without prejudice to the above legal contentions, it is also submitted that even if, for the sake of arguments but not admitting, it is presumed that the seized documents referre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of cross objection. On careful reading of said relevant para 3.8 at page 27 of the said order, we note that these observations as relied by Ld. DR have been given in a certain situation which is not similar to the present case and hence, we respectfully hold that the benefit of the ratio of the decision of Coordinate Bench of ITAT, Ahmedabad in the case of DCIT vs Sandip N. Patel is not available for the revenue. Accordingly, we proceed to decide the cross objection of the assessee challenging the validity of notice u/s 153C of the Act and all subsequent proceedings held in pursuance thereto. 12. On cross objections, Ld. DR further supported the action of the Assessing Officer and submitted that the CIT(A) rightly dismissed ground no. 1,2, 3, 5 (b) and 6 (b) of the Act upholding the validity of notice u/s 153C of the Act and reassessment order passed u/s 153C r/w section 143(3) of the Act as the Assessing Officer rightly assumed jurisdiction to issue notice u/s 153C of the Act and making reassessment proceedings consequential. 13. On careful consideration of above submissions of both the sides, at the very outset, we may point out that the Assessing Officer issued a notice u/s 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... longs to such person. It is similarly provided in Section 292C(1)(i). In other words, whenever a document is found from a person who is being searched the normal presumption is that the said document belongs to that person. It is for the Assessing Officer to rebut that presumption and come to a conclusion or "satisfaction" that the document in fact belongs to somebody else. There ,must be some cogent material available with the Assessing Officer before he/she arrives at the satisfaction that the seized document does not belong to the searched person but to somebody else. Surmise and conjecture cannot take the place of "satisfaction". xxxxxxxxxxx 11. It is evident from the above satisfaction note that apart from saying that the documents belonged to the petitioner and that the Assessing Officer is satisfied that it is a fit case for issuance of a notice under Section 153C, there is nothing which would indicate as to how the presumptions which are to be normally raised as indicated above, have been rebutted by the Assessing Officer. Mere use or mention of the word "satisfaction" or the words "I am satisfied" in the order or the note would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to in section 153A In view of this phrase, it is necessary that before the provisions of Section 153C of the said Act can be invoked, the Assessing Officer of the searched person must he satisfied that the seized material (which includes documents) does not belong to the person referred to in Section 153A (i.e., the searched person). In the Satisfaction Note, which is the subject matter of these writ petitions, there is nothing therein to indicate that the seized documents do not belong to the Jaipuria Group. This is even apart from the fact that, as we have noted above, there is no disclaimer on the part of the Jaipuria Group insofar as these documents are concerned. 15. Secondly, we may also observe that the finding of photocopies in the possession of a searched person does not necessarily mean and imply that they "belong" to the person who holds the originals. Possession of documents and possession of photocopies of documents are two separate things. While the Jaipuria Group may be the owner of the photocopies of the documents it is quite possible that the originals may be owned by some other person. Unless it is established that the documents in question, whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the papers seized belongs or belong to the assessee (noticee). The Appellate Forums have further found that no addition or even observations have been made by the Assessing Officer in any of the orders for the relevant assessment years in connection with any material found during the course of search Even for that reason no action under section 153C, is justified. These findings of fact need no interference and have not been questioned before us. Considering the above, these appeals must fail." 17. Further, Hon'ble Jurisdictional High Court of Delhi in the case of S.S.P. Aviation vs DCIT (supra) in para 17 held thus:- "17. The judgment of this court in Saraya Industries Ltd. (supra) was relied upon by Mr. Bajpai, in support of his contention that the seizure of the document must be of such nature that even closed assessments for six years could be reopened and this requirement postulates that the provisions of Section 153C can be set in motion only if there is a finding that the seized document or books of account or valuable article represents the undisclosed income of the other person. The said decision does not assist the petitioner. The section merely enables the reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person mentions that as per Annexure A-1, pages 53 & 54 viz. detailed chart of all the projects undertaken by Amrapali group which contains company wise detail of projects undertaken by various companies of Amrapali Group, it may be mentioned that Amrapali Group is not a legal entity but comprises of group of companies which individually and separately are having their different corporate/partnership firm entities. Subsequently, the Assessing Officer of the other person i.e. present assessee states that "Therefore, the company wise information appearing in these pages will be treated as documents pertaining to all the respective companies, appearing in the said chart." 19. At this point, we may point out that the chart appearing on page 53 & 54 contains detail of projects wherein present assessee i.e. Amrapali Grand has been enlisted at sl. No. 1 and in the other relevant columns, location project wise stage of completion, cost incurred, cost to be incurred, balance amount to be received from cashier, sale value of unsold flats, total receivables and surplus amounts have been mentioned. This chart contains details of 12 companies including the present assessee and title of this c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o have been unaccounted by the management of search entity and the same was surrendered as unexplained income in the books of M/s Ultra Home Construction (P) Ltd. which is a company of Amrapali Group. In this position, when the unaccounted cash receipts have been accounted and surrendered as unexplained income to M/s Ultra Home, we are unable to see any other incriminating material or document etc. which could lead the Assessing Officer of other person to record his satisfaction that documents etc. belong to or belongs to the present assessee (other person) were seized during search and seizure operation on Amrapali group. In this position, when the unaccounted cash receipts have been accounted and surrendered as unexplained income of M/s Ultra Home, we are unable to see any other incriminating material or document etc. which could lead the Assessing Officer of other person to record his satisfaction that documents etc. belong to or belongs to the present assessee (other person) were seized during search and seizure operation on Amrapali group. 21. In view of foregoing discussion, we are unable to hold that the only basis of reasons recorded for action u/s 153C of the Act before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he present case, undisputedly and admittedly, there was no satisfaction note recorded by the Assessing Officer of the person searched. This being the position, the first step prior to the issuance of notice u/s 153C of the Act has not been fulfilled by the Assessing Officer of the person searched i.e. Amrapali group. When we proceed to evaluate the validity of reasons recorded by the Assessing Officer of the other person for issuance of notice and initiation of proceedings u/s 153C of the Act, then from the reasons recorded (Annexure A- 1), it is amply clear that the Assessing Officer has merely picked on pages no. 53 & 54 of the sized material which is, in fact, a chart showing detail of provision of Amrapali group company including name of the present assessee of Amrapali Grand at sl. No.1 but this cannot be held as belong to or belongs to the present assessee. It is further observed that even the Assessing Officer of the other person has not used the words "belong to or belongs to" in the reasons recorded and he has noted that the company wise information appearing in these pages will be treated as document pertaining to all the respective companies appearing in the said chart. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and on which matters the assessee can give meaningful explanation and reason it out as and when opportunity is given to the concerned assessee. 24. At this juncture, it is also relevant to respectfully take cognizance of dicta laid down by Hon'ble High Court of Delhi in the case of CIT vs MGF Automobiles Ltd. dated 13.8.15 I.T.A. 13 & 14/2015 wherein speaking for the Jurisdictional High Court, their lordships held that the Assessing Officer proceeded to frame assessment u/s 153A of the Act relying on some information not unearthed during the search, then the assessment orders passed with reference to section 153A(1) of the Act were unsustainable in law. Furthermore, the Hon'ble High Court of Delhi in the case of PCIT vs Kurele Paper Mill Pvt. Ltd. I.T.A. No.369/2015 dated 6.7.15, their lordships held as follows:- "2. The Court finds that the order of the CIT(Appeals) reveals that there is a factual finding that "no incriminating evidence related to share capital issued was found during the course of search as is manifest from the order of the AO." Consequently, it was held that the AO was not justified in invoking Section 68 of the Act for the purposes of making addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or documents seized or requisitioned belongs to or belonged to a person other than the person referred to in section 153A of the Act, then the books of accounts or documents etc. seized or requisitioned shall be handed over to the Assessing Officer for jurisdiction over such other person. In the present case, the Assessing Officer of the searched person has not recorded any satisfaction to rebut the presumption u/s 132(4A)(i) and u/s 292C(i) that seized documents do not belong to the searched person. Furthermore, the reasons recorded by the Assessing Officer of the other person i.e. present assessee, Annexure A-1 clearly reveals that the Assessing Officer of the other person in the reasons recorded prior to initiation of action and issuance of notice u/s 153C has not recorded that the chart pages 53 & 54 in Annexure A-1 party AB-1, the sole alleged document belong to or belongs to the present assessee. However, the Assessing Officer of the present assessee referring to the said chart has merely mentioned that the company wise non-appearing in these pages will be treated as document pertaining to all the respective companies which is not a proper and valid reason for initiation of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... glery of words by mentioning that the company wise non appearing in these pages will be treated as documents pertaining to all respective companies including the assessee company appearing in the said chart. In this situation, we are inclined to hold that the reasons recorded by the Assessing Officer of the present assessee for initiation of action u/s 153C of the Act and issuance of notice under the said provision do not quash the requirement of said provision as accepted in the Act at the time of recording satisfaction. It is also relevant to mention that the socalled seized document i.e. chart cannot be held as belongs to or belong to the present assessee and on this ground also, the validity of reasons recorded comes within the teeth of proposition laid down by Hon'ble Jurisdictional High Court in the case of Pepsico Holding Pvt. Ltd. (supra) and Pepsi Food Pvt. Ltd. vs CIT (supra). Respectfully following the proposition laid down by Hon'ble Jurisdictional High Court, we are inclined to hold that the reasons recorded for action u/s 153 of the Act and issuance of notice under the said provision was not only bad in law but void ab initio which cannot be held as sustainabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... new case during appellate proceedings. 34. At the very outset, we observe that the Ld. CIT(A) granted relief for the assessee with following observations and conclusions: "6.2 I have considered the assessment order and the submissions made. Facts are that the appellant firm has advanced the money to these persons who are directors in M/s Ultra Home Construction Pvt. Ltd. Funding for various projects of the Amrapali Group is raised mainly from banks / financial institutions, which require that the directors / partners must also give personal guarantees for the loans and for such guarantees they must themselves have adequate assets and liquid funds. M/s Ultra Home Construction Pvt. Ltd. is the flagship company of Amrapali Group and bank finance is raised by this company. This company is also majority partner of the appellant firm. Funds are infused by the partners into the appellant firm for the project, which in turn advances money to the directors of Ultra Home Construction Pvt. Ltd. so that more funds / finances can be raised as the project progresses. The advances made to these persons by the appellant firm were to raise capital for the purpose of business. Therefore, these tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. CIT(A) have not been controverted by them. This view also finds support from the dicta laid down by Hon'ble High Court in the case of Tin Box (supra). Accordingly, we are unable to see any valid reason to interfere with the order of the first appellate authority. Thus, Ground No. 3 of the Revenue being devoid of merits is dismissed. Ground No.2 37. Apropos Ground No. 2, we have heard arguments of both the sides and carefully perused the material placed on record before us on this issue. The Ld. DR supported the action of the A.O and submitted that the assessee claimed expenditure on account of purchase from certain parties who were involved in merely issue of purchase bills effecting the payments through banking channels for commission not actually supported with physical verification of goods. The Ld. DR also pointed out that Shri A. K. Sharma, Director of group company, M/s Ultra Homes in his statement recorded on 9/9/2010, during search and seizure operation, had agreed to surrender huge amounts and hence, when the assessee failed to produce the relevant party (seller) to prove the genuineness of alleged purchase, the A.O was quite correct in making addition in this reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant from its bank account with Corporation Bank (A/c No.CBCA-27) and Bank of Maharastra (CA-227) credited to the bank accounts of Shree Saraswati Steel Centre (A/c No.00191131000233) and Laxmi Enterprises (A/c No.00191131000929) maintained with Oriental Bank of Commerce, Wright Ganj, Ghaziabad. The only reason for the revenue to treat these transactions as bogus is that Shree Saraswati Steel Centre, stated to be running its business from 50, Mali Wara Ghaziabad (LIP), was not found at the said premises and the proprietor of Laxmi Enterprises did not personally appear (although reply was filed by the said concern). The revenue has also linked these transactions with an admission made by Sh. Anil Sharma, the Managing Director and main person of the Amrapalli group, during the course of search that the group had engaged in unsubstantiated purchases and his offer to tax of undisclosed income amounting to ₹ 44,87,02,688/- on this count. 5.3 I have carefully considered the case made out by the revenue in the assessment order vis-a-vis the submissions of the appellant and the documents produced before me (also produced before the AO). Admittedly, all the documents required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xmi Enterprises was duly registered with TIN: 09388805587 since 01.12.2007 and VAT @ 12.5% had been charged on the sales. The appropriate course of action was to inform the VAT authorities about the tax deducted so that the deposit of tax could have been verified by them. The AO of the selling parties could have also been informed about the sales made and whether these had been reflected in the tax returns filed and to take action if no return had been filed. In any case, adverse view could still have been taken against the appellant if neither the VAT had been deposited nor the said parties filed any income-tax return. Moreover, the bank accounts of the parties, available with the AO, could also have been further investigated. None of these courses of action appear to have been taken by the revenue. Instead, addition was made for non- production of the said party. Business relation can be transaction-based, and it is not possible for any business concern to physically produce all the parties with which it may have had transactions in the past. Therefore, the adverse inference drawn by the revenue is pre-mature and without sound basis." 40. At the very outset, we note that the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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