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TMI Blog2018 (10) TMI 578X X X X Extracts X X X X X X X X Extracts X X X X ..... ears have to be reckoned from date of recording of satisfaction note i.e. March 10, 2014 which falls in the financial year 2013-14 i.e. assessment year 2014-15 accordingly preceding six years i.e. assessment years 2008-09 to 2013-14 can only be assessed under section 153C and present assessment framed under section 153C for the assessment year 2007- 08 is time barred, illegal, void ab initio and requires to be declared as nullity. 2. That as per the documents described in beginning of the order (paragraph 2) which are purportedly seized from search operation on another person, the same as replied to the Assessing Officer during assessment are duly disclosed and do not give rise to any undisclosed income duly objected before the Assessing Officer (reply dated December 11, 2014 disposed on December 16, 2014), and sans any undisclosed income emanating out of the seized documents which is further fortified from the final order where none of the additions has any semblance with the seized documents, accordingly, notice issued under section 153C, order passed under section 153C and the learned Commissioner of Income-tax (Appeals) order all becomes bad in law and requires to be quashed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w as the same does not meet the mandatory criteria stipulated under section 153C of the Act. 3. That notice issued under section 153C, order passed under section 153C and subsequent order passed by the learned Commissioner of Income-tax (Appeals) are all bad in law for want of juris diction and requires to be quashed. On the merits 4. That without appreciating categorical reply of the assessee where it is plainly denied that the assessee is not in effective receipt of any amount from Fiitjee group which stand was taken before the learned Commissioner of Income-tax (Appeals) also as noted in the impugned order, the confirmation of the addition of Rs. 23,59,65,731 is arbitrary and invalid being bereft of legally sustainable grounds. 5. That without appreciating mandatory jurisdictional requirement of the presence of incriminating material, addition is made by the learned Assessing Officer in the assessment order which is mechanically confirmed by the Commissioner of Income-tax (Appeals) with out adverting to inundated binding jurisprudence available on the subject, which addition without having any linkage with search based "incriminating" material, requires to be deleted i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sheet and revised income and expenditure account. Notices under section 143(2) of the Act were issued in both the assessment years on December 12, 2014. The objections raised by the assessee against proceeding under section 153C of the Act were disposed of by the Assessing Officer and communicated to the assessee in writing vide letter dated December 16, 2014. All the documents seized from the premises of the . . . group had also been already provided to the assessee. The assessee did not comply with the queries of the Assessing Officer and repeatedly raised objections against the proceedings under section 153C of the Act and sought adjournment on one or other pretext. 3.1 The Assessing Officer brought to the knowledge of the assessee that the statement of Sri Aseem Gupta, controller of the assessee-society, wherein he admitted that a bank account was opened and operated in Canara bank in the name of the assessee by the directors of . . . . . . . . group. Sh. Aseem Gupta further admitted that the assessee-trust (society) was used as a conduit for rotating certain funds of the . . . . . . . . group. Sh. Aseem Gupta further admitted that in lieu of making the trust (society) availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee filed any appeal before the learned Commissioner of Income-tax (Appeals) in both these assessment years and challenged the assessment both on the legality in assuming jurisdiction as well as on the merits. In both the assessment years, the learned Commissioner of Income-tax (Appeals) rejected the appeal of the assessee, holding that the assessee had been unable to justify any of the grounds of the appeal. The relevant finding of the learned Commissioner of Income-tax (Appeals) in the assessment year 2007-08 is reproduced as under : "8.5 Reply dated February 27, 2017 was submitted by the appellant which is reproduced above in paragraph 7.2. It is seen that the appel lant has adopted evasive tactics and has not given the complete information/details etc. Thereafter, several opportunities were given to the appellant but it could not justify the grounds of appeal raised by it. A perusal of the entire facts of the case, particularly with reference to the appeal of the appellant for the assessment year 2011-12, show that the appellant has been involved in the receipts and payments on its own behalf and on behalf of M/s. FIITJEE Ltd. and the directors and other persons associa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITJEE group was carrying out the transactions from the bank account of the appellant. The appellant was also required to support the claims with full details and evidences. However, the appellant kept on stating that the FIITJEE group was having full control over the transactions through the bank account of the appellant but did not submit complete evidence against the FIITJEE group. 8.15 It is observed that when confronted with the mismatch and discrepancies, it was claimed by the appellant that they cannot explain any discrepancy or difference, "as transactions were routed by officials of the FIITJEE group. You are requested to ask the reason of the same from the FIITJEE group." The appellant further stated in the written submissions dated March 6, 2017 that : 'In support of our claim, that bank account was operated by the FIITJEE group. We want to submit that, cheques for routing the trans action were filled and deposited by them and we did not have any control over there.' 8.16 Again, in the written submissions dated March 23, 2017, it was again submitted by the appellant that "the claimed documents were not signed by us, reply this question, and would be best ans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessed under section 153C of the Act and the present assessment year i.e. 2007-08 cannot be assessed under section 153C of the Act and, thus, making assessment under section 153C of the Act by the Assessing Officer, is void ab initio and requires to be declared as nullity. 4.1 The learned counsel filed a paper book containing pages 1 to 170 and in support of the ground raised, he referred to the judgment dated August 17, 2017 of the hon'ble Delhi High Court in the case of Principal CIT v. Sarwar Agency Pvt. Ltd. (I. T. A. No. 422 of 2017)- [2017] 397 ITR 400 (Delhi), available on pages 62 to 66 of the paper book. 4.2 The learned counsel submitted that section 153C(1) of the Act has been amended by way of the Finance Act, 2017 with effect from April 1, 2017, for specifying that the assessment years preceding the assessment year relevant to the previous year in which search is conducted, are to be assessed under the provisions of section 153C of the Act. The learned counsel submitted that this amendment has been held by the hon'ble Delhi High Court judgment in the case of Sarwar Agency Pvt. Ltd. (supra) as prospective in nature and not applicable in the year under conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 153C of the Act has been issued validly. 4.4 We have heard the rival submissions and perused the relevant material on record. The issue in dispute in the instant case is that which six assessment years are to be assessed under section 153C of the Act. 4.4.1 As far as section 153A of the Act is concerned, the six assessment years, which have to be assessed or reassessed, are the six assessment years, preceding the assessment year relevant to the previous year in which search is conducted or requisition is made, as specified in clause (b) of sub- section (1) of section 153A of the Act, which is reproduced as under : "153A. Assessment in case of search or requisition.-(1) Notwith standing anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person (for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and) for the relevant assessment year or years referred to in sub-section (1) of section 153A : Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person : (Italicised portion inserted by way of Finance Act, 2017) 4.4.3 The proviso, below section 153C of the Act is in relation to the second proviso below sub-section (1) of section 153A of the Act. The said second proviso below section 153A of the Act is for deciding which assessment or reassessment shall abate. In the case of section 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seized assets/documents belong to another person and the said assets/documents have been transferred to the Assessing Officer of such other person, the proceedings for assessment/reassessment of income of the other person has to proceed in accordance with provisions of section 153A of the Act. Section 153A requires that where a search has been initiated under section 132 of the Act, the Assessing Officer is required to issue notice requiring the noticee to furnish returns of income in respect of six assessment years relevant to the six previous years preceding the previous year in which the search is conducted. As discussed here inbefore, by virtue of second proviso to section 153A, the assessment/ reassessment pending on the date of initiation of search abate. In the context of proceedings under section 153C of the Act, the reference to the date of initiation of the search in the second proviso to section 153A has to be construed as the date on which the Assessing Officer receives the documents or assets from the Assessing Officer of the searched person. Thus, by virtue of second proviso to section 153A of the Act as it applies to proceedings under section 153C of the Act, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ording satisfac tion under section 153C of the Act as the date when the Assessing Officer of the assessee received the documents from the Assessing Officer of the search person. Since this date i.e. March 25, 2014 falls in the assessment year 2014-15, the six assessment years preceding the assessment year 2014-15, are the assessment year 2008-09 to the assessment year 2013-14. Since the assessment year involved before us is 2007-08, it is beyond the six assessment years which could be assessed/reassessed under section 153C of the Act. Thus, in our opinion the assessment proceeding under section 153C of the Act in assessment year in question, is without jurisdiction and beyond the purview of the said provision. Accordingly, we quash the assessment proceeding under section 153C of the Act in the instant assessment year. Ground No. 1 of the appeal is accordingly allowed. 5. Since we have already quashed the assessment proceeding, we are not adjudicating the other issues raised by the assessee in its grounds. 6. In the result, the appeal for the assessment year 2007-08 is allowed. I. T. A. No. 3981/Delhi/2017 for the assessment year 2011-12 7. Now, we take the appeal for the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isfaction note have been replied to be adequately recorded/explained/accounting books of account and no undisclosed income is emanating out of the same and no addition has been made on the basis of the said documents in the assessment order. The learned counsel referred to the documents found and their explanation reproduced by the learned Commissioner of Income-tax (Appeals) in the impugned order. In support of the contention that for a valid jurisdiction under section 153C of the Act the document or material belonged to the other person should be incriminating and must relate to the assessment years, whose assessment are sought to be reopened, the learned counsel relied on the decision dated September 4, 2017 of the Delhi High Court in Principal CIT v. Index Securities P. Ltd. (I. T. A. No. 566 of 2017), wherein the hon'ble Delhi High Court has relied on the decision of the hon'ble apex court in the case of CIT v. Sinhgad Technical Education Society [2017] 397 ITR 344 (SC) ; [2017] 84 taxmann.com 290 (SC). 8.1.2 The learned counsel further relied on the decision of the Tribunal dated August 11, 2017 in the case of CIT (Asst.) v. Saldi Chits Private Ltd. in I. T. A. Nos. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi High Court in the case of SSP Aviation Ltd. v. Deputy CIT [2012] 346 ITR 177 (Delhi) ; [2012] 20 taxmann.com 214 (Delhi). 8.2.2 She distinguished the decision of the Delhi High Court in the case of N. S. Software (Firm) (supra) stating that in the said case satisfaction was recorded in very casual manner without giving detail of contents of the seized document, whereas in the present case, documents have been properly specified as belonging to the assessee. She submitted that the documents in question are incriminating qua the assessment year under consideration and therefore the requirement provided in the case of Sinhgad Technical Education Society (supra) are also fulfilled. 8.3 We have heard the rival submissions and perused the relevant material on record including the cases relied upon by both the parties. In the instant case, whether the satisfaction recorded under section 153C of the Act meets the criteria of the jurisdictional requirement, following three issues arise in before us : (i)Whether the documents on the basis of which satisfaction under section 153C has been recorded, belongs to the assessee ? (ii)Whether the documents on the basis of which satisfa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ily mean and imply that they 'belong' to the person who holds the originals. Possession of documents and possession of photocopies of docu ments 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 estab lished that the documents in question, whether they be photocopies or originals, do not belong to the searched person, the question of invoking section 153C of the said Act does not arise. 16. Thirdly, we would also like to make it clear that the Assessing Officers should not confuse the expression 'belongs to' with the expressions 'relates to' or 'refers to'. A registered sale deed, for exam ple, 'belongs to' the purchaser of the property although it obviously 'relates to' or 'refers to' the vendor. In this example if the purchasers premises are searched and the registered sale deed is seized, it cannot be said that it 'belongs to' the vendor just because his name is mentioned in the document. In the converse case if the vendor's premises are searched and a copy of the sale de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. Copy of account opening form submitted to Canara bank, Hauz Khas Documents belongs to the Canara bank, Hauz Khaus and only related to/ refers to the assessee 10. Copy of draft MoUs of the assessee with FIITJEE LTD. Unsigned draft letter , not belonging to the assessee. 11. Copies of draft letters addressed to FIITJEE Ltd regarding the scheme of scholarship to be given to them. Unsigned draft letter , not belonging to the assessee 8.3.5 From the copy of letter of request for issuing cheque book or copy of account opening form submitted to the Canara bank Hauz Khas, the only possibility that these documents could belong either to the asses see or to Canara bank. If the original letter addressed to the bank, is duly submitted to the bank, then it belongs to the bank, however, the said original letter till it is not submitted to the bank, it belongs to the assessee. If a copy of the original letter on which acknowledgment is received from the bank, then it would belong to the assessee, as it would be the copy marked for the assessee. In this case, Sh. Aseem Gupta, controller of the assessee-society has admitted that how the above documents travelled to the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the financial year 2010-11 for M/s. CMV and M/s. Sadbhawna and send the same to me along with bank statements in August, 2011. Thereafter, I prepared books of account and got accounts of these trust and society audited from my friend Sh. Ravi Gupta, Chartered Accountant. Till the date of receipt of profit and loss account and balance-sheet, I was not aware about the nature of the transaction made in the bank account of these trust/ society. As incentive, I was allotted statutory audit of their following account : 1. M/s. Tetrahedron Education Academy Society, 5-9-14D, Sahara Manji, Saifabad, Hyderabad-500 004 2. M/s. Srikara Educational Society, H. No. 8-3-167/D/15, 1st Floor, Kalyan Nagar, Hyderabad-500 038. 3. M/s. Emanuel Education Society, H. No. 47-7-47, IV Lane, Dwarkanagar, Opp. Nehru Bazar, Vishakhapatnam. 4. M/s. Vijetha Educational Society, H. No. 232, Shanti Plaza, KPHB Colony, Kulkatpally, Hyderabad. I have received Rs. 60,000 as audit fee for these concerns. Q. 10. Was there any agreement between you as trustee and mem ber of M/s. Sadbhawna and M/s. CMV Education Society respectively and M/s. Fiitjee Ltd. or its promoter members made ? Ans. : An agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank, however, the assessee has not discharged his onus to prove the said contention. These documents are also not with the Canara Bank . Accordingly, we reject the contention of the assessee raised in this regard and hold that the documents mentioned in the satisfaction note under section 153C of the Act recorded by the Assessing Officer of the searched the person belong to the assessee. 8.4 The second issue, which has been raised by the learned counsel for the assessee that these documents are not incriminating in nature. 8.4.1 We have observed the statement of Sri Aseem Gupta, a part of which has been already reproduced above. It is evident from the statement that these documents are part of the fund rotating exercise from the asses see to M/s. FIITJEE Ltd. The controller of the society himself has admitted in response to question No. 8 that there was no activities in the trust. He has also admitted the fact that duly signed cheque books of the said Canara Bank account was given by him to the authorities of the FIITJEE Ltd. The authorities of the FIITJEE Ltd. were having complete control over the funds available in the said bank account. Sh. Aseem Kumar Gupta admitted of hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidence-cum-office of Narendera Kumar Aggar wal, 1st & 2nd Floor, 7, Western Avenue, Maharani Bagh, New Delhi. Various papers were found and seized belonging to M/s. N. S. Software Pvt. Ltd. the annexure are marked as under : Party A-20 Annexure A-26, Hard Disk containing books of account of M/s. N.S. Software Pvt. Ltd. Thus the proceedings under section 253C read with section 153A of the Income-tax Act, 1961 are being initiated in the above case." 8.5.2 In respect of the above satisfaction note in the case of N. S. Software (Firm) (supra), the Tribunal observed that the Assessing Officer did not indicate how vaguely refer red documents in the satisfaction note were found to be belonging to the assessee within the meaning of section 153C of the Act. The Tribunal further observed that there was no record ing/reference about the contents of these documents allegedly pertaining to the assessee and even in the assessment order, no such mention had been made. 8.5.3 The honourable Tribunal and observed that the learned Assessing Officer has not explained steps taken by him to determine that the seized material belong to the assessee-firm. The hon'ble High Court held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etail of each document and what the said document contains. The nature of the document is also clear in the satisfaction note recorded. Whereas in the case of N. S. software (Firm) (supra), the Assessing Officer has merely mentioned that various papers belonging to the said assessee were found and seized. The Assessing Officer in said case only mentioned annexure number and contents of which were not mentioned. 8.5.7 In view of the above, in our opinion, the facts of the case of NS software (supra) are distinguishable and thus, the ratio of the said decision of the hon'ble High Court over the facts of the instant case. Accordingly, we reject the content ion of the learned counsel on this issue. 8.5.8 In view of the aforesaid discussions, we are of the opinion that the proceedings under section 153C of the Act have been validly initiated in the case of the assessee. Grounds Nos. 1 to 3 of the appeal challenging the validity of the proceedings under section 153C of the Act are accordingly dismissed. 9. In ground No. 4, the assessee has challenged the addition denying the stand taken by the learned Commissioner of Income-tax (Appeals) that the assessee is not in effective rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel has failed to explain as how the funds have been utilised for charitable purpose. In the instant case by way of collusion between the FIITJEE group and the assessee, the funds have been given the group entities in the name of disbursement of scholarship etc. This collusion is evident from the statement of Sh. Aseem Gupta as how the cheque books of the assessee-society were controlled by the authorities of the FIITJEE group. By way of providing scholarship to the meritorious students, the FIITJEE group has served its business purposes of attracting the students to various courses run by them. Thus in our opinion, the funds of the assessee-society have not been utilised for the charitable purposes. We, accordingly, uphold the finding of the lower authorities in denying the exemption under sections 11 and 12 of the Act. The ground No. 4 of the appeal is accordingly dismissed. 10. In ground No. 5, the assessee has challenged the jurisdictional requirement of presence of incriminating material. The ground of jurisdictional requirement of presence of incriminating material has already been adjudicated by us in grounds Nos. 1 to 3 of the appeal and, therefore, we are not separately a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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