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TMI Blog2018 (12) TMI 1751X X X X Extracts X X X X X X X X Extracts X X X X ..... 1537, 1538, 1539, 4692, 1563, 1564, 2013, 2772, 2773, 2774, 2177, 2178, 2151/Del/2012, ITA No. 1654, 1655, 1656, 1657, 3208, 3209, 3210, 3211, 1648, 1649, 1650, 1651, 1652, 1653/Del/2013, ITA No. 3328, 5056/Del/2011, ITA No. 5572, 3001/Del/2014, C.O. 67, 68, 69, 84, 127, 128, 129/Del/ 2010, C.O. No. 126, 127, 128, 129, 130, 131/Del/2013 ORDER PER BENCH:- The Jurisdictional High Court of Delhi, vide order dated 22.01.2015, has considered a batch of appeals preferred by the Revenue, challenging the common order of the Tribunal dated 23.11.2012. 2. The question of law, sought to be urged by the Revenue is as to whether section 153C of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short], to the extent it, inter alia, enables the Assessing Officer to issue notice to third parties, on the basis of satisfaction that "any money, bullion, any jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person" referred to in section 153A i.e. the person searched, is wide enough to lead to a notice only on the basis of entries in some documents. 3. The relevant findings o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries Corporation Ltd, Superior Industries Ltd, DCM Shriram Industries Ltd, Saraya Industries, M/s Lords Distillery Limited and National Industrial Corporation Ltd were remitted to the Tribunal for reconsideration on the lines indicated in the said order of the Hon'ble High Court. 5. The representatives of the captioned assessees were heard at length. In addition to their respective oral submissions, each of them also preferred written synopsis. 6. The ld. CIT-DR was also heard at length, who also preferred to file written synopsis alongwith certain documents, which formed the basis of satisfaction note and ultimately the assessment orders framed u/s 153C of the Act. 7. Arguing his case for UPDA, the ld. AR Shri Sampat vehemently stated that the revenue has misguided the Hon'ble High Court in as much as all the documents were very much there in the paper book filed before the Tribunal in the first round of litigation though they were not annexed with the assessment order. 8. It is true that the Assessing Officer has annexed certain impounded documents/loose sheets as part of the assessment order which were not filed by the appellant alongwith appeal memo. It is equally t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A reveals that illegal payments were made by various Distilleries to various public servants. The UPDA acted as the nodal agency for making these illegal payments. 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-l & 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) Total (in Lakhs) 1. Saraya 945 1045 527.5 690 (Saraya+Balrampur 3207.5 804 1.134 636.9 889.6 3464.5 2 Rampur 752 945 599.4 705.6- 3002 3 SSL (Mansurpur) 463 607 374.8 591 2035.8 4 Lords (D.K. Modi) 582 616 404.9 486.9 2089.8 5 Daurala (DCM) 374 453 310.2 448.6 1585.8 6 7 Kesar (Baheri) 419 317 176.3' 245 1157.3 8 NIC (National) 327 359 242.4 348.6 1277 9 Simbholi 298 472 278.5 583.1 1631.6 10 Balrampur 298 328 244.5 870.5 11 Narang 61 153 105.1 235.7 554.8 12 **Pilkhani 162 339 185.3 213.6 899.9 13 **Shaml ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of this illegal payment amounts. Some of the instances noticed are as under:- (a) M/S National Industrial Corporation Ltd. (NICL) has paid more than Rs. 10 Crores in F.Y. 2002-2003 and 2003-2004 to M/S Aneja & Co. as commission / supervision charges. M/S Aneja & Co. even after including these amounts did not have to pay any tax. (b) M/S Unnao Distillery has paid more than Rs. 30 Crores as depot charges / expenses to two Delhi based parties, who .have paid negligible taxes on this amount. Such charges were not paid till Financial Year 2001-02. (c) Many distilleries started paying commission on sales, expenses on sales, sales incentives etc. from F.Y. 2002-2003 onwards, when these types: of payments do not result into corresponding incidence of tax in the hands of the recipients. Sometimes these payments are made to business concerns in non-related business. Shamii and Pilkhani 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determination of the total income of such other person [for six assessment iimmediately preceding the assessment year relevant to the previous year] such 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 45[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." 17. A plain reading of the afore-stated relevant provision shows that the Assessing Officer has to firstly rule out that the books of account or documents seized do not belong to the person searched. The satisfaction note exhibited elsewhere clearly shows that nowhere it has been ruled out that the documents seized do not belong to the searched person. In our understanding of the law, once this possibility is ruled out that the seized documents do not belong to the person searched, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch other person can issue a notice to that person and assess or reassess his income in accordance with the provisions of Section 153A. Therefore, before a notice under Section 153C can be issued two steps have to be taken. The first step is that the Assessing Officer of the person who is searched must arrive at a clear satisfaction that a document seized from him does not belong to him but to some other person. The second step is - after such satisfaction is arrived at - that the document is handed over to the Assessing Officer of the person to whom the said document "belongs". In the present cases it has been urged on behalf of the petitioner that the first step itself has not been fulfilled. For this purpose it would be necessary to examine the provisions of presumptions as indicated above. Section 132(4A)(i) clearly stipulates that when inter alia any document is found in the possession or control of any person in the course of a search it may be presumed that such document belongs 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 belo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act was issued directing the assessee to file its return of income for the assessments 2007-08 to 2012-13, enclosing a satisfaction note dated July 21, 2014 stating that the seized documents belonged to the assessee and it was a fit case for initiating proceedings under section 153C read with section 153A of the Act." 24. And held as under: "Allowing the petitions, that the seized documents mentioned in the satisfaction note were the ledger account maintained by the assessee showing the commission payments made by the assessee to R and the letter written by the assessee to R. Since the letter was written by assessee to R to be treated as a document belonging to R and not to the assessee. Whether it might or might not be related to the assessee was not relevant since the amendment to section 153C of the Act in that regard was prospective with effect from June 1,2015 i.e. subsequent to the date of preparation of the satisfaction note. With regard to the extract of the ledger account maintained by the assessee concerning the payments of commission made by it to R, even if it was held to "belong" to the assessee, it could not be an "incriminating" document. This was a docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the person searched Details of Annexure seized Details of papers/documents 1. M/s Earth Infrastructures Ltd, at B-100, Indl Area, Naraina, Phase -1 New Delhi Annexure A/27 panchnama dated 18.01.2013 Pages 120-122 are a of extract from the books (Ledger) of M/s ARN Infrastructures India Limited relating to M/s Real Gains Estate Pvt Ltd. Page no. 123 is a fetter written by ARN Infrastructures India Limited dated 27/1/2010. The said satisfaction note prepared by the AO of the person searched has been kept on record. I have also examined the above documents and the contents noted/written therein. After examination of these documents, I am also satisfied, that these documents belong to M/s ARN Infrastructures India Limited. .In view of the same, I am; further satisfied that it is a fit case for initiating proceedings u/s 153C rws-153A of the Income Tax Act, 1961 for AYs 2007-08 to A.Y 2012-13. Accordingly, notices u/s 153A rws 153C are issued as per provisions of the IT Act, 1961. New Delhi Asst. Commissioner of Income Tax 21/7/2014 Central Circle-14, New Delhi." 26. As mentioned elsewhere, the documents were seized from Shri R.K. Miglani or UPDA and, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entioning the names of distilleries [Member of Association] and the expected payments from such distilleries. These documents were signed by Shri R.K. Miglani and on behalf of different distilleries. The Revenue had prepared a chart for each assessment year and the payments made by the captioned assessees to the fund. This was allegedly used to bribe the public officials and politicians. The main thrust of the Revenue's grievance is with respect to amount stated to have been clandestinely given to UPDA as the captioned assessees contribution towards 'Slush Funds' to be used as 'pay offs' to politicians and public officers in return for favorable treatment. However, the Revenue has grossly failed in demonstrating the end use of such alleged 'slush funds'. Moreover, the Assessing Officer during the course of assessment proceedings never examined the captioned assessees representatives/employees nor any cross verification was done from any of the beneficiary of this 'slush fund'. 31. A perusal of the assessment order shows that the entire findings of the Assessing Officer are solely based upon the seized documents supplied by the searched party and the impugned satisfaction note. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particular member of UPDA. In fact, he has admitted that pages 152 and 155 were authored by him. 36. In reply to question No. 9, wherein Shri R.K. Miglani was asked to tell in brief about the expenses incurred by the members of UPDA during the course of normal business expenses, Shri R.K. Miglani replied that his office keeps record of contribution/payments by various members of UPDA directly to politicians and other persons/agencies. He showed his inability to furnish details of actual names and amount paid to various members. 37. This reply of Shri R.K. Miglani is also vague and is of general in nature, since he has categorically admitted that he has neither received any money nor he has disbursed any money. In fact, according to him, the various members of UPDA directly made payments to politicians and other persons/agencies. 38. There is nothing on record brought by the Revenue to demonstrate the details of payments and the names of the payees. 39. With respect to answer to Question No. 17, which is "I am showing you page 77 to 79 of Annexure A-2. Please explain the amount written by hand on various dates and who has written these amounts", the answer was : "The hand w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r a different issue. The Assessing Officer cancelled the registration on the strength of the statement of Shri R.K. Miglani and search which took place at his residence. The Tribunal upheld the order of the Assessing Officer which was affirmed by the Hon'ble High Court of Delhi. But this was in the context of provisions of section 12AA of the Act, and, therefore, cannot be stretched to the proceedings u/s 153C of the Act in respect of 11 distilleries. A judgment has to be considered in the context in which it was delivered. 46. The Assessing Officer, during the course of assessment proceedings, has heavily relied upon the entries found in the impounded documents. But, there is not even a single finding by the Assessing Officer which could suggest that the corresponding entries were found in the regular books of account of any of the distillery. This shows that no independent verification/examination was done by the Assessing Officer who simply relied upon the seized material supplied to him by the Investigation Wing. 47. The Revenue has strongly contended that the seized documents are such documents which belong to the captioned assessees. In our understanding of the facts an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... head. This was clear mandate of the Hon'ble High Court when it remitted the matter to the file of the Tribunal. 53. The ld. DR emphasized that the document 114 of Annexure A-1 bears the signature of two employees but we have to say that during the course of assessment proceedings, these employees were never questioned by the Assessing Officer to verify whether they actually put the signatures on those documents. In our considered opinion, such documents are only hearsay evidence. 54. Another theory propounded by the Revenue is that every distillery had to contribute Rs. 20/- per case and had thus contributed such a sum is entirely unsupported by any material. It is not known who had collected the alleged sum to have been contributed and what is the destination of such sum. In none of the documents, name of the payee, any public servant or politician appears. This itself establishes that the documents are dumb. 55. Before us, the ld. DR has supplied the copies of the documents which form Annexure of the seized documents, but has failed to demonstrate the basis on which such documents belonged to the distilleries or any of the distilleries. The emphasis was on the names appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [UPDA] does not by itself lead to a conclusion that adverse inference can be drawn against members of the association since documents were found from the premises of the association and not from the distilleries. The contents of the impugned documents have to be established as genuine by leading cogent positive evidence or material and have to be supported by corroborative material. In the present appeals, no such material has been brought on record. Therefore, we have no hesitation to hold that the proceedings u/s 153C of the Act have not been validly initiated and, therefore, deserve to be quashed. COMMON GRIEVANCE NO. 2 NO CROSS EXAMIANTION OF SHRI R.K. MIGLANI WAS ALLOWED BY THE REVENUE 61. All the appellant distilleries have raised another common issue claiming that the assessment orders have been framed in gross violation of principles of natural justice. It is strongly contended that the additions have been made on the basis of statement of Shri R.K. Miglani which was recorded during the course of search proceedings and in spite of repeated requests to the Assessing Officer to produce Shri R.K. Miglani for his cross examination opportunity was not provided to the assessed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by Smt.Sarla Gupta, cannot be said to be relevant or admissible evidence against the assessed, since the assessed was not given any opportunity to cross-examine her and even from the statement, no conclusion can be drawn that the entries made on the relevant page belongs to the assessed and represents his undisclosed income. It is also an admitted fact that the statement of the assessed was not recorded at any stage during the assessment proceedings. The only conclusion which can be drawn about the nature and contents of the document is that it is a dumb document and on the basis of the entry of nothings or figure etc. in this document, it cannot be concluded that this represents the undisclosed income of the assessee." 65. The Hon'ble Supreme Court in the case of Andaman Timber Vs. CIT in Civil Appeal No. 4228 OF 2006 has held as under: "According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity in as much as it amounted to violation of principles of natural justice because of which the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any person in the course of a search under section 132 20[or survey section 133A], it may, in any proceeding under this Act, be presumed- 1 i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; ii) that the contents of such books of account and other documents are true; and iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested. Where any books of account, other documents or assets have been d to the requisitioning officer in accordance with the provisions of 132A, then, the provisions of sub-section (1) shall apply as if such books of account, other documents or assets which had been taken into custody from on referred to in clause (a) or clause (b) or clause ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EL/2010 [A.Ys. 2003-04, 2004-05 & 2005-06] [Assessee's appeals] 74. The assessee urged permission to raise the following additional ground of appeal in support of Ground No. 2 of the grounds of appeal. The specific ground of appeal reads as under: "The assessment framed by the Assessing Officer on 30.12.2008 is barred by limitation and thus it be held to be without jurisdiction." 75. The ld. DR strongly objected to this plea of the ld. counsel for the assessee stating that this ground was not before the ld. CIT(A) and, therefore, cannot be taken up at this stage. The ld. DR further contended that in the first round of litigation, the matter travelled up to the Hon'ble High Court and the Hon'ble High Court, vide order dated 22.01.2015, set aside the order of the Tribunal with specific directions. A new ground cannot now be taken up after the orders of the Hon'ble High Court. In support of his contention, strong reliance was placed on the judgment of the Hon'ble High Court of Bombay in the case of Ultratech Cement Limited 2017-TIOL-785. 76. In our considered opinion and understanding of law, jurisdiction of the Assessing Officer can be challenged at any stage b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir Lordships had gone into this material question as to whether the act in breach of the mandatory provision is per force a nullity. The passage in Macnamara on Nullities and Irregularities, referred to in Ashutosh Sikdar v. Bihari Lai Kirtania [1907] ILR 35 Cal 61 [FB], at page 72, was in terms relied upon as under: "...no hard and fast line can be drawn between a nullity and an irregularity; but this much is clear, that an irregularity is a deviation from a rule of law which does not take away the foundation or authority for the proceeding, or apply to its whole operation, whereas a nullity is proceeding that is taken without any foundation for it, or is so essentially defective as to be of no avail or effect whatever, or is void and incapable of being- validated."Thereafter, their Lordships pointed out that whether a provision fell under one category or the other was not easy of discernment as in the ultimate analysis, it depended upon the nature, scope and object of the particular provision. Their Lordships in terms approved a workable test laid down by Justice Coleridge in Holmes v. Russel [1841] 9 Dowl 487 as under: "It is difficult sometimes to distinguish between an ir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause jurisdiction could neither be waived nor created by consent, while a procedural provision could be waived by conduct or agreement. Their Lordships pointed out that in that case the assessee could not be said to have waived the provisions of the statute because there could not be any waiver of a statutory requirement or provision which went to the jurisdiction of assessment. The origin of assessment was either an assessee filing a return as contemplated in the Act or an assessee being called upon to file a return as contemplated in the Act. The respondents challenged the Act. The order of injunction did not amount to a waiver of the statutory provisions. The issue of a notice under the provisions of the Act related to the exercise of jurisdiction under the Act in all cases. The learned Chief Justice in terms pointed out that the revenue statutes are based on public policy. The revenue statutes protect the public on the one hand and confer power on the State on the other. Therefore, even in the context of such a revenue statute like a taxation measure such fetter on the jurisdiction being a fetter laid to protect public, on wider ground of public policy, it was held that such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribed under section 132(5) being intended for the benefit of the person concerned, it was held that the assessee could waive that provision. That decision could not, therefore, be invoked in the present context of such a jurisdictional provision which is also a mandatory provision enacted in public interest in this revenue statute as earlier pointed out and which could never be waived. Besides, the question of waiver could never be raised if the person had no knowledge of his legal rights so that he could make any such conscious waiver. In the present case, the Appellate Assistant Commissioner in his order had pointed out that it was when he perused the order sheet that he found that there were no reasons recorded by the Income-tax Officer for issuing notice under section 148. The entry on the order sheet dated September 3, 1963, simply contained the direction: "Issue notice under section 148", and no reasons were recorded by the Income-tax Officer before reopening the assessment. Even the relevant sub-section of section 147 under which the assessment was sought to be reopened was not mentioned. These facts, prima facie, disclosed that the reasons came to the notice of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are competent orders with jurisdiction and if the proceedings of reassessment are not validly initiated at all, the order would be a void order as per the settled legal position which could never have any finality or conclusiveness. If the original order is without jurisdiction it would be only a nullity confirmed in further appeals. If the essential distinction is borne in mind in such cases when there is such defect of jurisdiction because the conditions to found jurisdiction are absent, the Tribunal also would be suffering from the same defect and it could not confer any jurisdiction on the Income-tax Officer by making the remand order, because of the settled legal principle that consent could not confer jurisdiction when jurisdiction could be created only by fulfilment of the condition precedent as in the present case. Therefore, no question of finality of the remand order could ever arise in the present context, if the mandatory conditions for founding jurisdiction for initiating reassessment proceeding were absent. This is the view in Commissioner of Income-tax v. Nanalal Tribhovandas [1975] 100 ITR 734 (Guj), agreeing with the Madras view that there would be no such finalit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nge the correctness of the High Court's decision. The two special features which distinguished that case were: one, that the order of the High Court which was relied upon to invoke the principle of res judicata was an interlocutory order, and the other, that it was made in a pending suit which as a result of that order did not finally terminate. In the present case also the remand order did not terminate the proceedings at the earlier stage. In fact, no question of any bar of res judicata even at the subsequent stage of the same proceeding could arise in the present case for the simple reason that the original order is said to be without jurisdiction. The first condition in invoking any bar of res judicata is the condition about the competence of the court. Similarly, the provision of finality in this relevant provision in section 254(4) could also not be attracted in such a case, where the question admittedly, went to the root of the jurisdiction and if that contention was upheld, it would have made all the proceedings of reassessment totally void and without jurisdiction. As per the aforesaid settled legal position such a point could not be waived and there can be no question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment is barred by limitation. We accordingly, reject the contention of the ld. DR and allow the additional ground of appeal raised by the assessee. 80. The ld. counsel for the assessee, in support of his claim of this new plea, vehemently stated that it goes to the root of the matter, in as much as, the jurisdiction of the Assessing Officer is questioned. It is the say of the ld. counsel for the assessee that since the assessment is barred by limitation, the same cannot stand on its own legs. 81. The bone of contention is the period of limitation provided u/s 153B(b) of the Act. The said section reads as under: '153B. Time-limit for completion of assessment under section 153A.-(1) Notwithstanding anything contained in section 153, the Assessing Officer shall make an order of or reassessment,- (a) in respect of each assessment year falling within six assessment years ret in clause (b) of sub-section (1) of section 153A, within a period of two years end of the financial year in which the last of the authorizations for search section 132 or for requisition under section 132A was executed; b) in respect of the assessment year relevant to the previous year in which conducted un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requisition under section 132A was executed or nine months from the end of the financial year in which books of account or documents or assets seized or requisitioned are handed over under section 153C to the Assessing Officer having jurisdiction over such other person, whichever is later:. Explanation.-In computing the period of limitation for the purposes of this Section (1) the period during which the assessment proceeding is stayed by an order or injunction of any court." 82. A plain reading of the aforesaid provisions alongwith proviso and relevant part of the explanation shows that the period of limitation expires nine months from the end of the F.Y. in which the books of account or documents or assets seized or requisition are handed over u/s 153C of the Act to the Assessing Officer having jurisdiction over such other person. As is evident from the assessment order, a satisfaction as per provisions of section 153A of the Act was recorded by the ACIT, Central Circle 4, New Delhi on 07.12.2006. 83. On 06.12.2006, the assessee filed a writ petition before the Hon'ble High Court of Calcutta challenging the order passed u/s 127 of the Act transferring the jurisdiction fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed. Shadi Lal Enterprises Ltd ITA Nos. 454 to 456/DEL/2010 [Revenue's appeals & CO Nos. 67 to 69/DEL/2010 [assessee's cross objections] 88. The CIT(A) has annulled the impugned assessment order holding that no addition has been made on the basis of seized documents in the impugned A.Ys. Therefore, the Assessing Officer has initiated the proceedings u/s 153C r.w.s 153A of the Act without any jurisdiction. Therefore, the proceedings initiated u/s 153C of the Act are not as per law. 89. The Revenue is aggrieved by this finding of the first appellate authority for the impugned A.Ys. 90. Assessment has been framed u/s 153C r.w.s 153A of the Act vide order dated 24.12.2007 for A.Ys 201-12 and 2002-03. A perusal of the assessment order shows that the entire assessment has been framed on the strength of the documents seized from the premises of Shri R.K. Miglani and on the statement of Shri R.K. Miglani recorded u/s 132(4) of the Act. 91. We have discussed this issue in detail while adjudicating common grievance Nos. 1 and 2 elsewhere. For our detailed discussion therein, we hold that the assessment framed u/s 153C r.w.s 153A of the Act is without jurisdiction and accordingly, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Industries [Assessee's appeal] 100. The entire assessment has been framed on the strength of the documents seized from the premises of Shri R.K. Miglani. Certain documents were also found at the premises of the appellant. Scrutiny of page 13 of Annexure A-2 revealed that Rs. 2.63 crores have been paid by the appellant to UPDA from April to July 2005 and a further sum of Rs. 75 lakhs was paid to UPDA in the month of July 2005. The Assessing Officer was of the opinion that this payment stands verified from the amount received by UPDA from the documents found and seized from the premises of Shri R.K. Miglani where the amount received is shown at Rs. 74.98 lakhs and, therefore, matches with Rs. 75 lakhs 101. When these facts were confronted to the assessee and the assessee was asked to explain the sources of payments made by it as found in the documents seized from residence of Shri R.K. Miglani and from the premises of UPDA, no specific reply on this issue was filed by the assessee except strongly contending that he notings/entries on loose sheets/diaries found at the premises of Shri R.K. Miglani/UPDA do not have any evidentiary value. This contention of the assessee was rejected b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od evidence against the assessee. The answer is given by the Hon'ble Supreme Court in the case of V.C. Shukla [supra] wherein the Hon'ble Supreme Court held as under: "A conspectus of the above decisions makes it evident that even correct and authentic entries in books of account cannot without independent evidence of their trustworthiness, fix a liability upon a person. Keeping in view the above principles, even if we proceed on the assumption that the entries made in MR 71/91 are correct and the entries in the other books and loose sheets which we have already found to be not admissible in evidence under Section 34) are admissible under Section 9 of the Act to support an inference about the formers' correctness still those entries would not be sufficient to charge Shri Advani and Shri Shukla with the accusations levelled against them for there is not an iota of independent evidence in support thereof. In that view of the matter we need not discuss, deleve into or decide upon the contention raised by Mr. Altaf Ahmed in this regard. Suffice it to say that the statements of the for witnesses, who have admitted receipts of the payments as shown against them in MR 71/91, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is prima facie reliable and that too, supported by some other circumstances pointing out that the particular third person against whom the allegations have been levelled was in fact involved in the matter or he has done some act during that period, which may have co-relations with the random entries. In case all these are not insisted, the process of law can be abused against all and sundry very easily to achieve ulterior goals and then no democracy can survive in case investigations are lightly set in motion against important constitutional functionaries on the basis of fictitious entries, in absence of cogent and admissible material on record, lest liberty of an individual be compromised unnecessarily. The materials which have been placed on record either in the case of Birla or in the case of Sahara are not maintained in regular course of business and thus lack in required reliability to be made the foundation- of a police investigation. [Para 21] * In case of Sahara, in addition there is adjudication by the Income Tax Settlement Commission. The order has been placed on record. The Settlement Commission has observed that the scrutiny of entries on loose papers, computer prints ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffence or make out a case against the accused. (2) Where the allegations in the first information report and other materials, if any. accompanying the FIR do not disclose a cognizable offence, justifying an investigation by police officers under section 156( 1) of the Code except under an order of a Magistrate within the purview of section 155(2) of the Code. (3) Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused. (4) Where the allegations in the FIR do not constitute a cognizable offence but constitute only a non- cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated u/s 155(2) of the Code. (5) Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused. (6) Where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue stand dismissed. ITA Nos. 1654 to 1657/DEL/2013 SVP Industries Ltd [Revenue's appeals] 114. Common Grievance in both the impugned appeals by the Revenue is that the CIT(A) has erred in cancelling the assessment for the A.Ys under consideration. 115. Assessment has been framed u/s 153C r.w.s 153A of the Act vide order dated 19.12.2011 for A.Ys under consideration. Entire assessment has been framed on the strength of the documents found seized from the premises of Shri R.K. Miglani/UPDA and on the statement of Shri R.K. Miglani recorded u/s 132(4) of the Act. 116. Since we have given categorical finding while adjudicating Grievance Nos. 1 and 2 elsewhere that the impugned documents do not belong to the assessee and on such finding, we hold that assessment framed u/s 153C r.w.s 153A of the Act is without jurisdiction and the same is annulled for want of jurisdiction, therefore, we do not find it necessary to dwell into the merits of the case. There is no error or infirmity in the findings of the first appellate authority. 117. In the result, the appeals filed by the Revenue stand dismissed. ITA No. 2013/DEL/2012 SVP Industries Ltd [assessee's appeal] 118. The sum and subst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd [Revenue's appeal] 124. The CIT(A) has annulled the impugned assessment order framed u/s 153C r.w.s 153A of the Act dated 26.12.2018. 125. A perusal of the order of the CIT(A) shows that the CIT(A) annulled the assessment holding the impounded documents from the premises of Shri R.K. Miglani/UPDA do not belong to the assessee. Therefore, the Assessing Officer has initiated the proceedings without any jurisdiction. Accordingly, the proceedings initiated u/s 153C of the Act are not as per law. 126. The Revenue is aggrieved by this finding of the first appellate authority for the impugned A.Y. 127. We have discussed this issue in detail while adjudicating common grievance No. 1 elsewhere. For our detailed discussion therein, we hold that the assessment framed u/s 153C r.w.s 153A of the Act is without jurisdiction and accordingly, assessment order is annulled for want of jurisdiction. No interference is called for. 128. In the result, the appeal filed by the Revenue is dismissed. C.O. No.84/Del/2010 (In ITA No. 457/Del/2010) Kesar Enterprises Limited 129. In its cross objection, the assessee has challenged the assumption of jurisdiction by the Assessing Officer u/s 153C o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be conclusively stated that Narang refers to Narang Distilleries only because satisfaction has been recorded in the name of Narang Industries. 138. Be that as it may, assumption of jurisdiction u/s 153C of the Act on the basis of documents impounded from the premises of Shri R.K. Miglani/UPDA has been held by us as unlawful. Accordingly, we have annulled the assessment order so framed while deciding common Grievance No. 1. For our detailed discussion given therein, added with our findings given in common grievance No. 2, we hold that the assessment so framed u/s 153C r.w.s 153A of the Act is bad in law and without jurisdiction. Since we have annulled the assessment, there is no need to dwell into the merits of the addition. 139. In the result, the appeals of the assessee are allowed. ITA No. 5056/DEL/2011 Narang Distillery Ltd [Assessee's appeal] 140. The sum and substance of the grievance of the assessee is that the CIT(A) grossly erred in confirming the action of the Assessing Officer in framing assessment without assumption of jurisdiction as per law upon the assessee and framing the impugned assessment u/s 143(3) without applying the mandatory conditions of section 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t/additions made on the basis of documents impounded from the premises of Shri R.K. Miglani/UPDA have been held by us not relevant for framing assessment u/s 153C of the Act while deciding common Grievance No. 1 elsewhere. For our detailed discussion given therein, added with our findings given in common grievance No. 2, we hold that the assessment so framed u/s 153C r.w.s 153A of the Act is bad in law and without jurisdiction. 147. In the result, the appeal of the Revenue is dismissed. ITA No. 1658/Del/2010 ITA No. 1871/Del/2010 National Industrial Corporation Ltd 148. The sum and substance of the grievance of the assessee is that the CIT(A) grossly erred in confirming the assessment framed u/s 153C r.w.s. 153A of the Act merely on the basis of certain documents found and during the course of search from the premises of Shri R.K. Miglani. 149. We have discussed this issue in detail while adjudicating common grievance No. 1 elsewhere. For our detailed discussion therein, we hold that the assessment framed u/s 153C r.w.s 153A of the Act is without jurisdiction and accordingly, assessment order is annulled for want of jurisdiction. Therefore, we do not find it necessary to dwel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court/Tribunal and it shall also apply retrospectively to pending SLPs/appeals/cross objections/ references. The pending appeals below the specified tax limit in para 3 above may be withdrawn/not pressed." 156. However, it is observed that in case on re-verification at the end of the Assessing Officer it can be demonstrated that the tax effect is more, or Revenue's case falls within the ambit of exceptions provided in the Circular, then the Department will be at liberty to approach the Tribunal for recall of this order relatable to such case. Such application should be filed within the time period prescribed in the Act. 157. In the light of the aforesaid CBDT Circular, the appeals filed by the Revenue are dismissed. 158. In the result, all the appeals of the Revenue stand dismissed. ITA No. 2177/Del/2012 ITA No. 2178/Del/2012 ITA No. 2496/Del/2010 Modi Industries Limited [Assessee's appeals] 159. The sum and substance of the grievance of the assessee is that the CIT(A) grossly erred in confirming the assessment framed u/s 153C r.w.s. 153A of the Act. 160. A perusal of the assessment order dated 28.12.2007 shows that the entire assessment has been framed on the stren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the ld. DR. Now the issue is well settled in favour of the assessee by the Hon'ble Supreme Court in the case of Singhad Technical Education 397 ITR 344. 167. It would be pertinent to refer to the findings of the Hon'ble Delhi High Court in the case of Kabul Chawla [supra] which reads as under: "The decision in CIT Vs. Anil Kumar Bhatia does not deal with a situation where, as in the present case, no incriminating material was found during the search conducted u/s 132 Nevertheless, it was interesting to note that in CIT Vs. Chetan Das Lachman Das the court underscored the need for department to have unearthed material during the search to justifying the assessment sought to be made. It was held that an assessment u/s 153A has to be made under this section only on the basis of seized material. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: (i) Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the additions made by the Assessing Officer are on the basis of statement of Shri R.K. Miglani, this issue has been discussed at length by us while deciding common Grievance No. 2. On this count also, addition is not maintainable. 169. In the result appeals of the assessee are allowed. ITA No. 3001/DEL/2014 Simbholi Sugars 170. Since the assessment has been held quashed, we do not find it necessary to dwell into the merits of the case. 171. In the result appeal of the Revenue is dismissed. 458/DEL/2010 Superior Industries Ltd 172. Grievance of the Revenue is that the CIT(A) erred in annulling the assessment by holding that no document was seized during the search pertaining to this A.Y. 173. Facts on record show that search and seizure operation u/s 132 of the Act was undertaken on the business premises as well as residential premises of Shri R.K. Miglani/UPDA. Facts on record also show that no documents have been seized which can be said to be belonging to the assessee for F.Y. 1999-2000 pertaining to A.Y 2000-01. Since no documents were seized for the A.Y under consideration, there was no question of framing assessment u/s 153C r.w.s 153A of the Act. 174. On the given f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laborate findings on the documents seized from the premises of Shri R.K. Miglani/UPDA while adjudicating Common Grievance No. 1 elsewhere. For our detailed discussion given therein, we hold that such documents do not belong to the assessee and, therefore, the assessments framed on the strength of such documents are without jurisdiction and hence deserve to be annulled. 185. In the result, appeals of the Revenue stand dismissed. C.O. No. 126/Del/2013 C.O. No. 127/Del/2013 C.O. No. 128/Del/2013 C.O. No. 129/Del/2013 C.O. No. 130/Del/2013 C.O. No. 131/Del/2013 186. The cross objections of the assessee are covered by our detailed findings given while adjudicating common grievance No. 2. 187 In the result, the cross objections of the assessee are allowed. ITA No. 9/Del/2012 ITA No. 10/Del/2012 ITA No. 11/Del/2012 ITA No. 3208/Del/2013 ITA No. 3209/Del/2013 ITA No. 3210/Del/2013 ITA No. 3211/Del/2013 U.P. Distillers Association [Assessee's appeals] 188 The above appeals are preferred against the orders of the CIT(A), New Delhi for A.Ys 2001-02 to 2007-08. ITA Nos 11/D/2012 and 3211/DEL/2013 are appeals where assessment has been framed u/s 143(3) of the Act whereas all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Panchnama of the assessee reads as under: "Order u/s 133A(3) (1a) of the I.T Act. The following books of accounts/documents found during the course of survey u/s 133A at the premises of UPDA, 4th Floor, PHD House, August the premises of UPDA, 4th Floor, PHD House, August Kranti Marg, Delhi on 14/2/2006 are hereby impounded. S. No. Description Pages A-1 Executive Diary 2006 1 to 22 A-2 Block Diary 2004 1 to 168 A-3 Organizer 2005 1 to 151 A-4 Ibico Spiral Note Book 1 to 40 A-5 Ibico Spiral Note Book 1 to 42 A-6 Loose Papers 1 to 14 A-7 Loose Papers 1 to 19 A-8 Loose Papers 1 to 24 A-9 CPU One Recovered Annexure A-1 to A-B Along with the survey folder R. K. Gupta Asstt. Director of Income Tax (Inv.) Unit-V(3), ARA Centre E-2, Jhandewalan Extn. New Delhi 110055 Copy to the assessee R. K. Gupta Asstt. Director of Income Tax (Inv.) Unit-V(3), ARA Centre E-2, Jhandewalan Extn. New Delhi 110055." 197. From the Warrant of Authorisation, one thing is clear. Search operations were conducted at the premises of Shri R.K. Miglani u/s 132 of the Act and survey operation was conducted at the premises of the assessee u/s 133A of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s interests. It also provides a solid platform for interacting and communicating with several authorities and other related entities for the promotion, perpetuation and progress of the objectives and interests of the members of the appellant association. 204. Several documents were found and seized from the premises of Shri R.K. Miglani and also from the premises of the assessee. While examining the seized documents, the Assessing Officer was of the firm belief that Shri R.K. Miglani, being Secretary General of the assessee, has received various payments from the member distilleries during the F.Y. 2002-03 to 2005-06 relevant to A.Ys 2003-04 to 2006-07. The details of such alleged payments are as under: S. No. Name of the Distillery 2002-03 2003-04 2004-05 2005-06 (till Jan) Total (In Lakhs) 1 Saraya 945 1045 527.5 690 (Saraya + Balrampur 3207.5 2 Unnao 804 1134 636.9 889.6 3464.5 3 Rampur 752 945 599.4 705.6 3002 4 SSL (Mansurpur) 463 607 374.8 591 2035.8 5 Lords (D. K. Modi) 582 616 404.9 486.9 2089.8 6 Daurala (DCM) 374 453 310.2 245448.6 1585.8 7 Kesar (Baheri) 419 317 176.3 348.6245 1157.3 8 NIC (National) 327 359 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the cases of Common Cause, A Registered Society Vs. UOI 394 ITR 220 wherein the Hon'ble Supreme Court considered the following facts: "Raids were conducted on the Birla and Sahara Group of Companies and incriminating materials in form of random sheets and loose papers, computer prints, hard disk, pen drives etc. were found. Evidence of certain highly incriminating money transactions were also found. * Question arises as to whether a case was made out on the basis of above materials, to constitute Special Investigation Team (SIT) and direct investigation against the various functionaries/officers and further monitor the same? And held as under: * Loose sheets of papers are wholly irrelevant as evidence being not admissible under section 34 so as to constitute evidence with respect to the transactions mentioned therein being of no evidentiary value. The entire prosecution based upon such entries which led to the investigation was quashed by this Court. [Para 20] * The Court has to be on guard while ordering investigation against any important constitutional functionary, officers or any person in the absence of some cogent legally cognizable material. When the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been able to show and substantiate the nature and source of receipts as well as nature and reason of payments and have failed to prove evidentiary value of loose papers and electronic documents within the legal parameters. The Commission has also observed that department has not been able to make out a clear case of taxing such income in the hands of the applicant firm on the basis of these documents. [Para 22] * It is apparent that the Commission has recorded a finding that transactions noted in the documents were not genuine and thus has not attached any evidentiary value to the pen drive, hard disk, computer loose papers, computer printouts. [Para 23] * Since it is not disputed that for entries relied on in these loose papers and electronic data were not regularly kept during course of business, such entries were discussed in the order passed in Sahara's case by the Settlement Commission and the documents have not been relied upon the Commission against assessee and thus such documents have no evidentiary value against third parties. On the sis of the materials which have been placed on record, it is opined that no case is made out to direct investigation against any of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te offences to direct the registration of F.I.R. and investigation therein. The materials should qualify the test as per the aforesaid decision. The complaint should not be improbable and must show sufficient ground and commission of offence on the basis of which registration of a case can be ordered. The materials in question are not only irrelevant but are also legally inadmissibly under section 34 of the Evidence Act, more so with respect to third parties and considering the explanation which have been made by the Birla Group and Sahara Group, it is opined that it would not be legally justified, safe, just and proper to direct investigation. [Para 27]" 210. In the case of V.C. Shukla [1998] Taxmann.com 2155, Hon'ble Supreme Court held as under: "A conspectus of the above decisions makes it evident that even correct and authentic entries in books of account cannot without independent evidence of their trust worthiness, fix a liability upon a person. Keeping in view the above principles, even if we proceed on the assumption that the entries made in MR 71/91 are correct and the entries in the other books and loose sheets which we have already found to be not admissible in ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the various members of UPDA directly to politicians and other persons/agencies. 213. The Assessing Officer has heavily relied upon page 81/A-3 seized from Shri R.K. Miglani's residence in which total country liquor produced by each distillery is given, which is converted into number of cases, then contribution of each distillery is calculated @ Rs. 20 per case. 214. It is pertinent to mention here that UPDA, the appellant is neither a manufacturer nor a distributor of country liquor or any other liquor. Therefore, this seized document has no relevant in so far as the appellant is concerned. Though repetitive requests were made to submit Shri R.K. Miglani for cross examination, but the same was not provided by the Revenue. The denial of cross examination of Shri R.K. Miglani has been discussed by us in length while deciding common grievance No. 2 elsewhere. 215. While discharging the duties of Secretary General of the appellant, it is not known why Shri R.K. Miglani was maintaining data relating to manufacture of country liquor by the members of UPDA. Moreover, Shri R.K. Miglani is not a computer literate person and does not know the principles of book keeping and accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entire case of the Revenue revolves around the payments made to UPDA by the distillery members and statement of Shri R.K. Miglani. Incidentally, the very same documents were considered by the Hon'ble High Court of Delhi in the case of Radico Khaitan Ltd 396 ITR 644 wherein the Hon'ble High Court has observed as under: "The revenue's argument mainly hinges upon the clandestine payments to UPDA and statements of its Secretary General. These include various tables and charts mentioning the names of distilleries (members of the association) and the expected payment from such distilleries. These documents were signed by the Sh. Miglani and on behalf of the different distilleries. The revenue had prepared a chart for each assessment year and the payment made by the assessee to the fund, according to it, worked out to Rs. 29.95 crores. This was allegedly used to bribe public officials and politicians. The reasoning of the Commission was that these documents were in the possession of UPDA and the statements of Sh. Miglani were made not in the course of its search (i.e. of the assessee's premises) and therefore corroboration of the statements as well as the documents wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested." It is evident that in the absence of these foundational facts, the revenue is under an obligation to establish through materials relatable to the assessee, what it alleged against it. What were the best pointers for further investigation were the discovery of material and evidence, which the revenue claim pointed to the assessee's failure to disclose full facts and income, should have resulted in further investigation and unearthing of material in the form of seized documents from the assessee's premises. Unfortunately the linkage between the material seized from the assessee's premises and those from UPDA's premises as well as the statement of Sh. Miglani was not established through any objective material. It is now settled law that block assessments are concerned with fresh material and fresh documents, which emerge in the course of search and seizure proceedings; the revenue has no authority to delve into material that was already before it and the regular assessments were made having regard to the deposition, the inability of the revenue t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble High Court has categorically mentioned that the linkage between the material seized from UPDA's premise as well as statement of Shri R.K. Miglani was not established through any objective material. Without bringing any cogent material on record, it is merely a presumption that the UPDA has been primarily engaged in the work of facilitating the collection and payment of bribe money. 221. Some more issues have been raised by the ld. DR. (i) On the basis seized from the residence of Shri R.K. Miglani, M/s Radico Khaitan Ltd surrendered Rs. 27.50 crores and Balrampur Chini Mills surrendered Rs. 8.90 crores. 222. We fail to understand how the action of some other tax payer is relevant in the case of the appellant. The wisdom of Radico Khaitan Ltd and Balrampur Chini Mills cannot be considered and should not be considered in the hands of the appellant. (ii) Incriminating documents were also seized from the laptop of Shri Ajay Agarwal, General Manager of M/s Radico Khaitan Ltd. 223. Again, it is between M/s Radico Khaitan Ltd and its General Manager to explain the incriminating documents. The assessee cannot be held to be responsible for the same. 224. The ld. DR has furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Constitution of India also visualizes the production and consumption of alcohol as being injurious to health and the objects of the association are against state policy. Many WHO articles have pointed out as to how the consumption of alcohol is injurious to health. 13.2. In addition to above, as per the seized documents and statement of Sh. Miglani as discussed above, association has been primarily engaged the work of facilitating the collection and payment of bribe money which is against the public policy welfare. 13.3. Due to the reasons explained above the object and activities of the Trust cannot be considered for charitable purpose and exemption u/s 11 and 12 of the IT Act, is denied and assessment is being made in the status of AO P." In view of the above detailed reasons, the assessee is not eligible for exemption u/s 11 & 12 of IT Act in respect of following unaccounted receipts: S. No. Assessment Year Amount (Rs.) 1 2003-04 56,80,00,000 2 2004-05 76,04,15,200 3 2005-06 45,22,94,401 4 2006-07 56,41,74,550 The above unaccounted receipts are not reflected in the return of income filed by the assessee. Moreover, at no stage of the proceedings, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant collects subscription of membership fees from its members and those collections are deployed for defrayal of expenses for activities of the club. This means that the collection from the members is for the benefit of the members and being so, principles of Mutuality would apply. 230. In the light of clarification of the Hon'ble High Court [supra] and in the light of decision of the co-ordinate bench given in ITA No. 573/DEL/2005 and in the light of our decision relating to the additions made u/s 68 of the Act, we are of the considered opinion that the benefits of section 11 & 12 cannot be denied to the assessee. 231. In the result, the appeals of the assessee are allowed. 232. We will now address to the assessments framed u/s 143(3) of the Act in assessment year 2006-07 ITA Nos. 3211/DEL/2013 and assessment year 2007-08 in ITA No. 11/DEL/2012. 233. In ITA No. 3211/DEL/2013, the assessee is aggrieved by the rejection of registration granted u/s 12AA of the Act by adding a sum of Rs. 2,2,5,209/- and is further aggrieved by the addition of Rs. 56.41 crores being unexplained credit entries u/s 68 of the Act. 234. We have already granted benefit of sections 11 & 12 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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