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TMI Blog2021 (12) TMI 921X X X X Extracts X X X X X X X X Extracts X X X X ..... o not find any infirmity in the action of the AO for issuing notice u/s. 148 - this ground of the assessee is dismissed and the reopening of assessment is confirmed. Addition u/s 69A - unexplained money - In course of search of PDP certain Compact Discs(CD) were found which contained data pertaining to unaccounted receipts and payments by PDP - seized document AK/PDP/06 and DTTE which was owned up by PDP and CHDC and determined income arising out of the same and taxed the same - Assessee reiterated his stand that the Assessee was only acting as liaison and the ledger was an imprest account where sums were spent on behalf of PDP and CHDC and Assessee has no interest whatsoever except as agent of PDP - HELD THAT:- SC in the case of CHDC that the entries arising from DTTE were offered to tax by the peak credit method. This has been accepted by the CIT(A). The CIT(A) has however gone on the premise that expenditure of PDP or CHDC would be income in the hands of the Assessee. This is contrary to the claim of PDP that the Assessee was acting as liaison for and on behalf of the Assessee that the ledger account was imprest account meaning thereby that whatever is found in the ledger is ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(DR)(ITAT), Bengaluru ORDER Per Chandra Poojari, Accountant Member These appeals by the assessee are directed against the common order of the CIT(Appeals) dated 02.01.2018 for the assessment years 2006-07 to 2009-10. 2. The grounds in these appeals are inter-related and all the appeals were heard together and disposed of by this common order for the sake of convenience. 3. The first common ground in this appeal is with regard to initiation of assessment proceedings u/s. 147 r.w.s. 148 of the Income-tax Act, 1961 [the Act], which according to the assessee, ought to have been initiated u/s. 153C of the Act. This ground is raised for the first time before the Tribunal and being a legal ground, we are inclined to adjudicate the same. 4. The facts of the case are that the assessee in these years filed original returns of income for the AYs 2006-07 to 2009-10. There was a search in the Dayanand Pai group cases u/s. 132 of the Act. During the course of search in the residence of employee, Smt. Adlene Kagoo on 12.4.2011, certain data pertaining to the transaction with Dayanand Pai and Shri Anand Nadig was seized. Consequent survey operation was conducted in the case of the firm, M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings, certain CDs were found and seized vide Annexure AK/PDP/06 dated 12.4.2011. These CDs contained data pertaining to unaccounted receipts and payment made by Shri Dayanand Pai's group for the period 1.4.2002 to 14.6.2008. The data is in Tally application under the caption 'Dummy (Tally Training Environment)' [DTTE]. The ledger extract pertaining to the present assessee, Shri Anand Nadig for the period 1.4.2005 to 2.5.2008 was also found in the DTTE. According to this ledger extract, Shri P Dayanand Pai has made cash payment to Shri Anand Nadig in respect of Mallasandra property at Sy. No.26/1, 10/1, 9/2A, 9/2B, 8, 3/3 & 7, 9, Raghuvanapalya property Sy.No.8, 8/3, 9/2A, 7 & 8 and Kothnur property Sy.No.169/4 & 170. The total cash payment made by Dayanand Pai was ₹ 16,11,774 on various dates for AY 2006-07. 8. Further, there was a survey conducted in the premises of D N Associates on 26.3.2011 and statement was recorded from Shri Purushothamma Adiga, CEO of Damanagiri Properties & Developers. In Q.No.10 put to Purushothamma Adiga, the transaction with Dayananda Pai was questioned and he replied the amount of ₹ 6 crores has been paid on different dates by Dayanand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count or documents seized or requisitioned "belong to" any person other than the person searched referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the AO having jurisdiction over such other person for such jurisdictional AO to complete the assessment. Thus, the expression "belong to" is very important issue. In the present case, the documents unearthed in the course of search action of Dayananda Pai group are not belonging to assessee, though they pertain to or having information relating to undisclosed income of the assessee and there is difference between the expression "belong to" and "pertains to" or any information contained therein relates to other person and it cannot be said that the documents unearthed in the course of search action belonged to present assessee. In the present case, DTTE did not belong to the assessee, though it contains information pertaining to the assessee. As such, the provisions of section 153C cannot be applied to the facts of the assessee's case. Being so, in the present case, it is not possible for the AO to assume jurisdiction u/s. 153C of the Act since the pre-requisite i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... risdiction over such other person for such jurisdictional Assessing Officer to complete the assessment. This position has been confirmed by the Hon'ble Supreme Court in the case of CIT v. Calcutta Knitwears [2011] 338 ITR 239/[2012] 20 taxmann.com 447 (Punj. & Har.). 14.2.3 Therefore, question posed whether, in view of the phraseology employed in the section, if the books of account belong to the person searched but entry in such books reflect the undisclosed income of the third party then, whether the AO can assume jurisdiction under s.153C to assess such undisclosed income or not. The expression 'belongs to' was a subject matter of debate. The point in issue was examined by Hon'ble Delhi High Court in Pepsico India Holdings (P.) Ltd. (supra). It observed in essence that expression belonging to assessee implies something more than idea of casual association. It was observed by the Hon'ble Delhi High Court that s. 153C cannot be invoked unless the AO is satisfied for cogent reasons that the seized documents do not belong to the searched person. It was observed that finding of photocopies with the searched person does not necessarily mean and imply that they & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein relates to the other person without the necessity of these documents etc. to be belonging to such other persons. Thus, in the light of the judicial precedent of the Hon'ble Delhi High Court and further in view of the subsequent legislative amendment, the difference between the expression 'belong to' and 'pertain to'/'relate to' are visibly clear. Similar legal position has been enunciated by the Hon'ble Gujarat High Court in the case of Kamleshbhai Dharamshibhai Patel v. CIT [2013] 31 taxmann.com 50/214 Taxman 558. Hence, in the light of above discussion, we are of the view that the loose paper and other documents and diaries etc. found from the possession of the searched person cannot be said to be belonging to the assessee or other third parties merely because transaction noted therein relate to or pertain to assessee and/or such other persons. This view is also fortified by express provision of s. 132(4A) of the Act whereby the presumption of documents etc. found in course of search weighs towards searched person. 14.3 As noted, post the legislative amendment, any books of account or documents seized or requisitioned requires to be merely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Secondly, for usurping jurisdiction under S. 147, the documents/papers found in the course of search need not 'belong to' the person other than person searched. Mere-demonstrable connection or live link to such third person revealing escapement of income is adequate to invoke remedy under S. 147. Thirdly and significantly, operation of Section 153C is dependent on the 'satisfaction' arrived by the AO of the searched person at the first instance and not that of AO of the person whose income is found to have escaped assessment. In the absence of such 'satisfaction' arrived by the AO of the searched person, the AO of the third party/Assessee herein would be rendered powerless to assess true income under S. 153C. In contrast, Section 147 can be invoked by the AO of the Assessee independently on arriving at satisfaction of escapement of income for a given assessment year regardless of 'satisfaction' of AO of searched person. Thus, it is self-evident that two sections operate quite differently. The effect of non-obstante clause under S. 153C is that pending assessment or reassessment proceedings shall abate. Hence, S. 147 will be rendered inoperative and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 153C of the Act has not been invoked and could not possibly be invoked, there was no impediment for initiating proceedings under s.147 of the Act by the AO as discussed in elaboration above. Therefore, in Cargo Clearing Agency and other decisions of the co-ordinate bench cited on behalf of the assessee rendered on similar lines do not give rise to any conflict and are of no assistance to the assessee. 14.6 Consequently, the second additional ground is also dismissed." 11. Accordingly, this ground of the assessee is dismissed and the reopening of assessment is confirmed. 12. Now we proceed to adjudicate the appeals on merits. 13. Before we deal with the merits of the additions made in the various AYs which are challenged in these appeals, a background of the case needs to be taken note. There was Search and Seizure proceedings carried out by the competent authority under Sec.132 of the Act, in the residence of Smt. Adlene Kagoo, who is stated to be a trusted employee of Shri P. Dayananda Pai (PDP) on 12.4.2011. PDP was also searched on 12.4.2011. PDP was a partner in a firm called Canara Housing Development Company (CHDC). There was also a company by name Century Real Estat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for rendering services. With this background, let us analyze the additions made by the revenue authorities in each AY. ITA No.576/Bang/2018: (AY 2006-07) 16. As far as the addition made in AY 2006-07 is concerned, it is a sum of ₹ 16,11,774/- u/s.69A of the Act. As we have already observed, there was a Search and Seizure carried out by the competent authority under Sec.132 of the Act, in the residence of Smt. Adlene Kagoo, who is stated to be a trusted employee of Shri P. Dayananda Pai (PDP) on 12.4.2011. PDP was also searched on 12.4.2011. In the course of search of PDP certain Compact Discs(CD) were found and seized vide Annexure AK/PDP/06 dated 12.4.2011. The CD contained data pertaining to unaccounted receipts and payments by PDP and Group for the period from 1.4.2002 to 14.6.2008. The data was found with the caption "Dummy(Tally training Environment)" (DTTE). 17. For AY 2006-07, the Assessee had already filed his return of income on 31.10.2006 declaring total income of ₹ 9,83,780/-. In response to the notice u/s.148 of the Act dated 28.3.2013, the Assessee filed copies of the earlier return of income already filed. 18. The AO confronted the Assessee with copy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee was giving different version regarding entries found in the ledger account which was part of DTTE by saying that in one AY the money is included in the receipts declared in the return of income and in another AY stating that no money was received by the Assessee from PDP. Secondly the CIT(A) held that what was offered as income before the SC was unexplained expenditure of PDP whereas the expenditure of PDP would be income in the hands of the Assessee and taxing the same in the hands of the Assessee would not amount to double taxation. He also held that nothing has been brought on record to show that the sum taxed by the AO was part of the unexplained expenses offered to tax before the SC. He also held that the letter of PDP filed before him was a self-serving document without any substance. 20. Aggrieved by the order of the AO, the Assessee is in appeal before the Tribunal. The learned counsel for the Assessee reiterated his stand that the Assessee was only acting as liaison and the ledger was an imprest account where sums were spent on behalf of PDP and CHDC and Assessee has no interest whatsoever except as agent of PDP. He reiterated his stand that since the sum was alrea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 4.5 Crores between 5.8.2006 till 19.12.2008. As a consequence to the search in the case of PDP, a survey u/s.133 of the Act was conducted by the revenue in the premises of D.N. Associates on 23.6.2011. Statement of K. Purushothama Adiga, CEO of M/s. Dhammanagi Property Developers was recorded in the course of survey and in reply to question No.10 regarding transactions with PDP as found in the DTTE, he replied that a sum of ₹ 6 crores had been paid on different dates by PDP towards advance for property at Devanahalli. Out of ₹ 6 Crores, ₹ 86 lacs was paid by cheque and the remaining sum of ₹ 5.14 crores was paid by cash. D.N. Associates had declared additional income of ₹ 3.64 Crores in AY 2007-08 and ₹ 50 lacs in AY 2008-09 thus total sum of ₹ 4.14 crores were offered in the return of income of D.N. Associates. A sum of ₹ 1 Crore was paid by M/s. Dhammanagi Property Developers. In the copy of this ledger account is at page 115 of the paper book, there was entries dated 12.8.2006, 2.11.2006, 18.11.2006 and 23.11.2006 wherein there is a description of cash received of ₹ 36,00,000, ₹ 25,00,000, ₹ 19.50,000 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 86 lacs even before the AO. In such circumstances, the addition made is unsustainable and hence the same is directed to be deleted. ITA No.577/Bang/2018 (AY 2008-09) 25. The Assessee filed return of income for AY 2008-09 declaring total income of ₹ 21,76,520/-. A notice u/s.148 of the Act dated 28.10.2014 was issued to the Assessee and in response to the same the Assessee filed copies of returns which he had originally filed. As far as this AY is concerned, the same ledger account in the name of the Assessee being part of DTTE was the basis of one of the addition of a sum of ₹ 1,75,10,000/-. The entries in the ledger for the period from 6.10.2007 to 17.1.2008 showed payments of ₹ 1,75,10,000/- to different persons and authorities. 26. As part of the DTTE there was another ledger account found of one M/s. D.N. Associates. The Assessee and one Sri Babu Dhammanagi were partners of M/s. D.N. Associates. A copy of this ledger account is at page 115 of the paper book. In this ledger there was an entry dated 6.4.2007 with description received towards Devanahalli property ₹ 50 lacs through Anand Nadig i.e., the Assessee towards Devanahalli Dhaba property ..... X X X X Extracts X X X X X X X X Extracts X X X X
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