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TMI Blog2011 (2) TMI 1432X X X X Extracts X X X X X X X X Extracts X X X X ..... e fact that the assessments under dispute were on protective basis and the appeals against the assessments made substantively in the case of Saravana Constructions were still pending; & - that the CIT (A) ought to have appreciated the fact that the assessee had failed to substantiate the claim of finance procured through various financiers by producing necessary material evidence. 3. As the issues raised in these appeals being identical and common, for the sake of convenience, they were heard, considered and disposed off in this common order. 4. The issues, in brief, were that there was a search operation u/s 132 of the Act on 8.10.2003 in the case of L. Sambhasiva Reddy and his associate concern - Saravana Constructions Pvt. Ltd [SCPL]. According to the Revenue, during the course of search, incriminating documents indicating a sizable cash loans availed by Sambhasiva Reddy and his associates and repayments made to various parties were unearthed. As the assessee was one of the alleged regular lenders of money to SCPL, he was subjected to an intensive investigation by the Revenue with regard to the transactions appearing in the seized materials and subsequently, the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1998-99 ₹ 16,37,500 1999-00 18,92,395 2000-01 18,81,450 2001-02 7,81,470 2002-03 4,43,000 2003-04 13,52,500 5. Assailed by the findings of the AO, the assessee had approached the CIT (A) for relief. Analyzing the spirited arguments put- forth by the assessee's authorized representative and also the facts of the issues placed before him, the Ld. CIT (A) had observed thus - "(On page 6)………It is seen that there is certainly force in the contentions of the appellant, particularly that the AO has examined his books and not rejected the same and these show he is a small financier having very small capital for investment. The Accountant of M/s. Saravana Constructions in his statement has stated that 'LSR' stands for L. Sambasiva Reddy, 'L' for Lakshman. It has been pointed out by the appellant that he has not been given the opportunity to cross-examining the Accountant and that the Accountant being an employee of Sri L. Sambasiva Reddy would only give statements in his favour. Before the ADIT also, he had denied that he had ever lent any money but only procured finance through various financiers. The most pertinent finding given by the AO that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e annulled. 6.2. On his part, the Ld. A R submitted that his client had never lent any money during the course of period under challenge to SCPL, however, conceded that he lent services in procuring finance through cheques from various parties as he was only a finance broker. The Ld. A R had also vehement in his insistence that his client was a small financier having very small capital for investment and thus, lent no money or made any investment with SCPL as projected by the Revenue, but, at the same time, he had acknowledged that his client procured finance for SCPL through various financiers. It was, therefore, pleaded that since the Ld. CIT (A) had arrived at a conclusion in a judicious manner and, thus, no interference is called for at this stage. 6.3 Further it was submitted by the learned AR that assessment is completed u/s 153C of the Act, since no search or requisition was made in his case. Therefore, it was contended that mention in the assessment order that the same is completed u/s 143(3) rws 153A is wrong. It was stated by the learned AR that no material belonging to the assessee was seized in the course of search conducted in the premises of L Sambhasiva Reddy and S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h his returns of income and so on and so forth. The aftermath of the issuance of the said notice has since been discussed/ narrated in the fore-going paragraphs. 8. The crux of the issue before us is - whether the assessing officer was within his realm to call upon the assessee to furnish his returns of income on the sole reasoning that the assessee's name was finding a place [ledger account] in the books of account of SCPL? It may not be out of place to mention here that no books of account or document belonging to the assessee was unearthed during the course of operation u/s 132 of the Act in the premises of SCPL. Such being a ground reality, we have been burdened with a task of analyzing the issue as to whether the AO was within his domain to issue a Notice u/s 153C r.w.s. 153A of the Act? 8.1. Let us have a glimpse of what s.153C of the Act precisely says? "153C. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lose association with the group concern of Shri Reddy. It records the transaction carried out by that group. It does not record the transaction carried out by the assessee. Under Wealth-tax Act, assets belonging to assessee were taxable. The expression belonging to the assessee connotes both the complete ownership and limited ownership of interest , of course belonging to is capable connoting, interest, which is less than absolute perfect legal title. However, there should be some limited ownership of interest, if it is to be permitted that the assets belongs to the assessee. In the instant case, documents or books of account found during the course of search and seized cannot be termed to be indicating any limited interest of the ownership of the assessee in such books of account or documents. The language used in section 153C is materially different from the language used under section 158BD. As per section 158BD, if any undisclosed income relates to other person, then action against such other person can be taken provided such undisclosed income is referable to the document seized during the course of search. However, section 153C says that if valuable or books of account or do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in his regular return of income filed. When the money advanced is totally unaccounted, the interest earned on such advance is also unaccounted interest income earned by the assessee." In this connection, we would like to point out that though the ledger account extract of SCPL had shown with regard to money advanced and interest payments etc., in the name of the assessee, however, the AO had not brought on record any clinching documentary evidence to show that the alleged interest payments found its way to the assessee. Yet again, the AO had further justified his action in bringing to tax net (in the hands of the assessee) the alleged investments and receipt of interests etc., on the premise that - " 9.4. (xi) the assessee has failed to submit either the confirmation for having not received the interest or any other evidence in support of his claim to prove that he has not advanced money and received the interest income." The reasoning of the AO can at best be viewed as rather strange and un-heard of. When the assessee has been steadily maintaining that he had neither lent any cash loan(s) to Sambhasiva Reddy and his associate concern nor received any interest from them, how c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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