9911796707
TMI Blog2011 (4) TMI 1339X X X X Extracts X X X X X X X X Extracts X X X X ..... ie in the case of LMJ INTERNATIONAL LIMITED. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX. [ 2007 (12) TMI 237 - ITAT CALCUTTA-E] that where nothing incriminating is found in the course of search relating to any assessment year, the assessments for such years cannot be distributed. Thus, the assessments made by the AO u/s 153C of the Act without the existence of AY-specific incriminating documents are invalid. In present case, based on the existence of the seized documents, these six AYs can categorized into two categories: AYs without seizure of any documents - In the present case regarding AYs 2000-01 to 2003-04 2005-06, admittedly, there is no seizure of the documents, thus issuance of notices u/s 153C, is invalid. AY with the seizure of some documents - For AY 2004-05, admittedly, there is some seizure of the documents. We are convinced that the said ledger is an accounted one. Mere appearance of names does not mean anything as section 153C is intended for taxing the undisclosed income of the third party based on the material/others seized during the search action. The documents, the ledger in the instant case relevant for the AY 2004-05, with no financial implications can neither ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. The ld CIT(A) erred in holding that the cash and the loose papers found with Shri Shinde belonged to the appellant and not to Shri Shinde and that the appellant had received the capitation fee as per these papers. 9. The ld CIT(A) erred in confirming the following additions to the total income in the hands of the assessee - i. Disallowance u/s 40A(3) - ₹ 8,920/- ii. Liabilities written back ₹ 33,90,406/- iii. Disallowance of certain expenditure of ₹ 13,21,222/- on the ground that it is a capital expenditure. 10. The ld CIT(A) erred in not setting off the excess deficit in the hands of the appellant trust till AY 1998-99 against the income of the appellant for this year. 11. The ld CIT(A) erred in holding that the donations received against the issue of coupons were on account of the capitation fee charged for admissions and they were not the corpus donations. 12. The ld CIT(A) erred in holding that the donations received specifically by cheques as corpus donations also constituted income of the appellant. 13. The ld CIT(A) erred in denying the deduction u/s 80L to the appellant. 14. The appellant requests for reduction in the interest ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no justification for issue of notice u/s 153C. In view of provisions of section 153C where any money, bullion, jewellery or valuable article or thing or books of accounts or documents seized belong to a person other than the person referred to section in 153A, then notice u/s 153C can be issued to the person whose books of accounts, etc. are seized. The assessee submits that the documents found with Shri Shinde which are mentioned in your reasons are not incriminating documents but they are the documents for the transactions which are duly accounted by the assessee trust in its books and therefore, there was no reason to issue notice to the assessee u/s 153C. The assessee contends that where regular documents which are accounted and can be verified are seized, then no notice u/s 153C can be issued. No incriminating material was found pertaining to the assessee during the search on Shri Shinde. Hence, we submit that the notice issued u/s 153C is not valid at all since no incriminating evidence has been found pertaining to the assessee. Accordingly, we request your Honour to kindly drop the proceedings initiated u/s 153C and oblige. 2. Your Honour has further stated that the seized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO, the relationship between the persons searched i.e. Shri R.D. Shinde and the assessee is very well established and there is no dispute about this. There is also no dispute about the fact that the premises searched i.e. cabin of Shri R.D. Shinde is situated on 8th floor of Bharati Vidyapeeth Bhavan. While raising the objections to the jurisdiction u/s 153C, the assessee states that everything found in the material is accounted for in the books. Firstly, the assessee never explained the seized material satisfactorily. Because the seized material shows evidences, going against the case of the assessee, the assessee invariably and conveniently ignored the vital contents of the seized material. Secondly, it is for the assessee to demonstrate whether the notings in the seized material are in agreement with the entries in the books. AO analysed the seized the papers in a coordinated manner and analysed the details of collection from students, as recorded in the seized slips, enclosed as Annexure I to the order, and numerous instances and came to the conclusion that the seized material belongs to the assessee and throws light on the fact of collection of donations/capitation fee, over a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellant to plead its ignorance or non involvement in the said collection of money for admission, on the ground that Shri Shinde has now been removed from service, was not accepted by the AO, on the ground that it has only been done as an after thought after realizing the requirement of their defence. AO has referred to facts and evidences which emerged after search and survey and which have been described in the factual matrix of the case in para 5. To avoid repetition detailed narration is not given again. On the accounted nature of the documents referred to in the satisfaction, it was stated by the AO that the assessee never co-operated in explaining each and every item found during search, in post search inquiries and whether a document is incriminating or not can only be found after making necessary verification or which first initiation u/s 153C was required. The AO further referred to the incriminating documents and huge cash seized, which according to him very clearly established the collection of the money in lieu of admissions in crores. In support of the same, reliance was placed on the statement of Shri Shinde. In view of all these discussions, the AO held the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng evidence has been found pertaining to the assessee. Accordingly, we submit that the notice u/s 153C is not valid and therefore, the asstt. made by the ld AO in pursuance of the said notice is also invalid. 4.2 The ld AO has further stated that the seized books of accounts indicate donations received in cash. However, we submit that the dept. has not seized any books of accounts pertaining to the assessee trust at the time search on Shri Shinde. Therefore, there is no question of any seizure and the fact that the assessee has received donations in cash is on the basis of the post search enquiries. Therefore, the notice issued on this ground is totally invalid. 4.3 Lastly, the ld AO has also referred to the statement of Shri R.D. Shinde (refer page 60 to 62) wherein according to the AO, Shri Shinde has stated that ₹ 2 Crs. received on account of consultancy fee from students has been deposited in the building and equipment fund of the various trusts of Bharati Vidyapeeth Group. We fail to understand as to how the ld AO can issue notice u/s 153C on the basis of his statement of Shri R.D. Shinde. First of all, Shri R.D. Shinde has not categorically stated that ₹ 2 Cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e course of the search. That was the case in respect of the concealed income that was required to be computed under the earlier provisions in section 158BC. However, the said stipulation is not present in section 153A or 153C. The contention is factually incorrect too as many of the additions made while completing the assessment have been based on the documents found during the course of the search. The documents had indicated that the assessee is charging huge donations, a part of which was introduced in the various funds in the guise of coupon donations. These have been brought to tax while completing the assessments u/s 153C." 8. The assessee in his rejoinder to the comments of AO in remand report, has made further submissions vide their letter dt 23.2.2010. The same is also quoted below for proper appreciation: "9. The assessee had further objected to the jurisdiction u/s 153C. The ld AO has stated that this issue has been considered in the asst. order and in view of the reasons given, the same is to be rejected. The assessee submits that the notice u/s 153C was issued on the basis of search on Shri Shinde. The ld AO has stated that certain documents were found relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which has resulted in the addition. Thus, the assessee submits that no incriminating evidence was found and hence, the additions made by the ld AO are not justified at all." 9. At the end of the proceedings, the CIT(A) confirmed the validity of the issue of the notice u/s 153C of the Act in respect of the AYs under consideration as per the discussion given in paragraph 7.6.1 of the impugned order. For the sake of convenience, the same are reproduced as under. 7.6.1 I have carefully considered the submissions of the appellant and the AO and find that the objections of the appellant on the validity of s. 153C is hinged on many grounds. The first and the foremost is based on the denial of ownership of cash and documents found during search establishing the collection of money for granting admissions/consultation. As per AO they belong to appellant for granting admissions, whereas the appellant claims this to be belonging and relating to Mr Shinde for his consultancy. The incriminating documents and cash are being claimed by the AO to be belonging to the appellant on the basis of the discussions made in the assessment order, much of which has been narrated in para 5 of this order, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue of validity of initiation of s. 153 is held invalid and is accordingly dismissed. 7.6.2 In addition to the above, the next objection of the appellant is apparently based on the argument that the documents enlisted by the AO in the satisfaction are not incriminating and therefore notice u/s 153C is not valid. It appears from the above argument that the appellant is not disputing the ownership of documents referred in satisfaction but are saying that those are art of the regular books of accounts or are accounted in the regular books of accounts, and therefore cannot be relied to initiate proceeding u/s 153C. On careful consideration, I find that the word 'incriminating' is missing in s. 153C, whose existence is being so strongly relied upon by the appellant. Furthermore, the AO's contention that a document is accounted or not can only be found after the verification, for which initiation of proceedings u/s 153C is required, appears quite logical and correct. I do not think that the AO can carry out necessary verification and inquiry unless the jurisdiction is assumed under either 153A or 153C or any such similar provision of Act. In view of the above, I do not find even this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment/concluded assessment must not be reopened or disturbed. Where there is seizure of any documents, the concluded assessment must not be reopened as long as such material is incriminating and there is prima facie opinion that some income is concealed by the assessee or escaped the said assessment. 13. Revenue's Arguments: On the other hand, Ld DR for the revenue relied on the orders of the AO and the CIT(A) on this issue of validity. Briefly, his arguments are that the provisions of the proviso to section 153A of the Act grants power to the AO for opening or reopening of the six assessments. As per the CIT-DR, as and when there is seized documents or others involving the other person, the third party, AO can assume jurisdiction in respect of all the six AYs of that third party and there is no requirement of the law that there should exist AY-specific and incriminating documents. 14. We have heard the parties and perused the orders of the revenue as well as the said order of the Tribunal relied upon by the assessee's counsel. It is a fact that there are various grounds raised in the appeals. The Core issue that is the root of the matter relates to the validity of the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used the reasons recorded by the AO of the assessee. We find that there exists the reasons for issue of notice u/s 153C of the Act and it is an undisputed fact. We also find that they are common reasons for all six AYs including the four AYs under consideration. The Counsel for the assessee argued vehemently that AO issued notices u/s 153C simply relying on the contents of section 153A(1)(b) of the Act and also its first proviso ignoring various settled legal propositions ie the concluded assessments, which fall in the bunch of six AY, should not disturbed unless there exists incriminating material relevant for the said AYs or concluded assessments and such incriminating material should be of3 that nature it should not be a dumb documents. In this regard, the stand of the revenue is that the express provisions are clear on the proposition that the AO is empowered under the statute to 'assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted.." (first proviso). Considering the contrary stands of the parties, without going into the merits of the additions, we have decided to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c to any of the impugned four AYs ie 2000-01 to 2003-04. The contrary argument from the side of the revenue is that the overall approach in matters of concealment by the group assesses and all the discoveries of the search on Mr Navale and it concerns, have to be taken into account while forming the satisfaction within the meaning of section 153C of the act. Considering the divergent views of the parties, we have examined the said satisfaction note very closely and found that the impugned reasons mentioned by the AO are silent in so far as any AYSpecific- Incriminating-Information (ASII) or others ie unaccounted or undisclosed or hidden information to the revenue by the assessee. In our opinion, the impugned satisfaction note is very general one for six years. It is surprising to note that the AO has narrated some information against the Mr Navale HUF, which is not relevant for the present assessee. In the process, the AO totally missed the requirements of the law ie only the AY with the pending assessments and the AY with the AY specific incriminating documents/ transactions or seized asset should only be reopened under the provisions of the first proviso to section 153A of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AY 2000-01 is uncalled for. 26. Therefore, the proceedings initiated u/s 153C is not valid in view of the decision in the case of LMJ International (supra). Under these circumstances, we are of the opinion, the AO has invalidly issued the notice u/s 153C for the AY 2000-01 on the wrong presumption that AO can assume jurisdictional in respect all the six AYs automatically even with out any incriminating documents in respect of the concluded issues too. Accordingly, the relevant grounds of the assessee are allowed. 12. From the above, it is our finding that the reasons recorded by the AO as extracted above do not contain anything incriminating for the AYs upto 2003-04. It is the settled position of the law based on the decision of the Tribunal in the case of LMJ International (supra) that the issue of notice under the provisions of the first proviso to section 153A(1) of the Act is not automatic and there is need for AY-Specific Incriminating Information (ASII) in the possession of the AO to be the fountain head for springing satisfaction to him that there exists some income or asset to be assessed in the hands of any other person, who are referred to in section 153C of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be said to be belonging to the assessee within the meaning of s. 153C. Further, where none of the assessments are pending on the date of action under s. 153C, such assessments do not abate." 4) LMJ International Ltd. (2008) 119 TTJ (Kol) 214 Conclusion:- "Where nothing incriminating is found in the course of search relating to any assessment years, the assessments for such years cannot be distributed; items of regular assessment cannot be added back in the proceedings under s. 153C when no incriminating documents were found in respect of the disallowed amounts in the search proceedings." 5) Kailash Auto Finance Ltd. (2009) 32 SOT 80 (Luck) Conclusion:- "A notice under s. 148(1) can be issued even where notice under s. 143(2) has been pending and not closed. By processing the return and by issuing acknowledgment as token of accepting the return, the proceedings initiated by filing the return are terminated and no proceedings, therefore, remain pending." 6) R.M.L. Mehrotra (2010) 320 ITR 403 Conclusion:- "Undisclosed income of the block period has to be determined on the basis of evidence found as a result of search or requisition of books of account or other documents and suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of LMJ International Ltd (supra) that "where nothing incriminating is found in the course of search relating to any assessment year, the assessments for such years cannot be distributed. Thus, the assessments made by the AO u/s 153C of the Act without the existence of AY-specific incriminating documents are invalid. 17. Application of the above scope to the facts of this case: Now we shall take up the contents of the satisfaction note and examine if there are any documents seized involving the assessee and if they are incriminating with reference each of the six AYs of the assessee. SATISFACTION NOTE FOR ISSUE OF NOTICE U/S 153C OF THE ACT "The search action u/s 132 of the IT Act was carried in the case of Shri Ramchandra Dada Shinde, on 22.7.2005. The assessee was working as accounts officer in the Bharati Vidyapeeth Group of trusts,. During the search action the office cabin of the assessee situated at Bharati Vidya Bhavan, near Alka Talkies, Pune-30 was searched along with his residential premises. During the search action books of accounts, documents and cash were found and seized. Total 3 bundles of loose paper were seized vide annexure A-1 of Panchnama dt 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ist of teaching staff of B.V.M.C. Sangali. Bundle No. A-9:- Page No. 45 - Counter foil of cash deposit in Bharati Sahakari Bank in Poona College of Pharmacy building fund A/c No. 69557 ₹ 1,75,000/-. Bundle No. A-9:- Page No. 50 - Expenditure voucher of Bharati Vidyapeeth Trust. Bundle No. 15:- This is a long book maintained by assessee trust as a inward register maintained for applications received under management quota for admission in MDS course. Bundle no. 16 - this is long book maintained by assessee trust as a inward register for receiving applications under management quota for admission in medical, dental, BHMS and BAMS course. The provisions of section 153C of the IT Act 1961 reads as '….where the AO is satisfied that any money, bullion, jewellery or other valuable article or thing or books of accounts or documents seized or requisitioned belongs or belongs to person other than the person referred to in section 153A then ….AO shall proceed against each such other person and issue such other notice and assessees or reassesses income of such other person in accordance with the provisions of section 153A….' Since in this case, the document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reflect the documents at sl no 7,8 & 10 of the table do not reflect any dates. In this regard, Ld Counsel mentioned that these three sets of documents relate to the vouchers for expenses/advances of the trust and in the absence of the specific dates, the same must be deemed relating to the current AY ie 2007- 08 in view of the settled propositions in this regard. Referring to the items at sl no 22 ie the Inward Register, Ld counsel argued stating that the same contains list of the names of the applicants for admission in to MDS under management quota of the PG seats and the same names are accounted and it does not contain any financial transactions. Otherwise, rest of the items of the documents relate to the AY 2007-08, which is not under consideration of this composite order. We have considered the explanations of the Sri Pathak and undertook the item-wise exercise of the items provided before us. On perusal of the same, we find the explanation of Ld counsel is in order and there is nothing to reject the same. 20. Conclusion: From the above it is clear that the AO issued notices u/s 153C simply relying on the contents of section 153A(1)(b) of the Act and also its first proviso i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in to this order, all except the item at sl no 22 relating to the Inward Register for applications received under the Management quota for admission in MDS course relate to the year 2004-05 (AY 2005-06). Otherwise, rest of the 22 items of seizure documents relate to the current AY ie 2006-07, which is not under consideration of this order. Thus, the notice issued u/s 153C of the Act for the AY 2005-06 where there is seizure of only an 'inward register for applications received under the Management quota for admission in MDS course relate to the AY 2005-06" and there are no financial transactions of any kind, in our opinion, is invalid. We are convinced that the said ledger contains the mere names of the MDS applicants for admission under Management quota and there is no reference to any financial transactions, whatsoever. As such these names are already borne in the list of students. It is evident that the said ledger does not contain any whispers about the likely undisclosed income for the years under consideration. It is settled issue that the notice u/s 153C of the Act is not valid when the seized documents do not indicate any undisclosed income of the assessee under considera ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
