TMI Blog2014 (2) TMI 421X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. Protective assessment can be made if the same amount is added in one hand and the same amount is added in another hand on protective basis - the AO made substantive addition in the hands of land companies and protective basis in the hands of assessee for these three years - The Tribunal has taken a decision that no addition can be made on the basis of material found during the course of search - In the case of the assessee, the addition cannot be deleted merely on the basis of the findings of the Tribunal, even on merit no addition can be made in the hands of the assessee - the protective addition made in the hands of the assessee for these three assessment years, was not justified - the order of the CIT(A) confirmed, who deleted the addition in the hands of the assessee made on protective basis – Decided against Revenue. - ITA Nos.1459 to 1461/Mum/2012 - - - Dated:- 31-7-2013 - R K Gupta And N K Billaiya , JJ. For the Appellant : Mr Vijay Mehta For the Respondent : Mr S D Shrivastava ORDER:- PER : Bench This common order shall govern the disposal of three appeals, which have been filed by the department against the order of learned CIT(A) for assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ai. This group's real estate operations are being handled mainly by Mr. Virendra Jain, Mr. Gauran Jain and Mr. Dilip Dherai. As pr evidences gathered during the search, Shri Dilip Dherai was found to be managing and handling the entire land acquisition operations for MSEZ, and outside MSEZ which is popularly known as OMSEZ. Mr. Dilip Dherai has his office at Jai Tower, CBD Belapur, Navi Mumbai. The land outside MSEZ (OMSEZ) has been purchased in various private ltd. companies which are called as land companies by the group. There are more than 100 such land companies. Employees of MSEZ and NMSEZ are directors in these companies. Mr. Dilip Dherai is part of Central Leadership Team (CLT), and Mr. Anand Jain, Mr. Sanjay Punkhia and Mr. Ajit Warthy are other key members of CLT in respect of the whole process of land acquisition in these companies. Mr. Sanjay Punkhia and Mr. Ajit Warthy also have their offices at Jai Tower, CBD Belapur and Jain Center, P. D'Meilo Road, Mumbai. A large number of incriminating documents were found and seized from the residence of Shri Dilip Dherai. These documents were confronted and his statement was recorded u/.s. 132(4) of the LT. Act. In the statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR as well as learned AR of the assessee. After considering the submission of both the parties and the orders of the authorities below, we found that the appeals of the department against deleting the protective addition are liable to be rejected. For the sake of completeness and to understand the matter properly, we would like to reproduce the written submission filed on behalf of the department as well as on behalf of the assessee. The contents of the written submission filed on behalf of the department are as under :- "I. The first contention of Revenue is that the Ld.CIT(A) was wrong in law by annulling/deleting the protective addition made by the A.O. in the hands of Shri Dilip Dherai - because - the making of a Protective Assessment is perfectly valid in such circumstances when documents have been found and seized from the residence of Shri Dilip Dherai, the 'land aggregator' - all relating to 52 land companies - floated for acquiring land. Hence, as held by the Hon'ble Supreme Court in the case of Lalji Haridas V. ITO 43 ITR 387 (SC), 1961 - where the Income Tax Authorities are not clear who has received the income and prima facie it appears that the income ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the above assessments in the hands of the 52 land companies are not confirmed by higher Appellate authorities - as done by Hon'ble ITAT in all the cases of 52 land companies by its order dtd.22.3.20 13. Then in such a situation - the Protective Assessment - of the same Income - done in the hands of Shri Dilip Dherai will revive and Revenue can then enforce it. Further, the factual findings given by the A.a. in the Assessment Order in Paras 13,13.1, 13.1.1,13.1.2 [evidencing cash payments], 13.1.3, 13.1.4, 13.1.5 [no credibility on retraction of statement on oath of Shri Dilip Dherai by subsequent filing of Affidavit], 13.1.5.1 [cash payments], 13.1.5.2, 13.1.5.3 [cash payments], 13.1.5.4, 13.1.5.5, 13.1.5.6, 13.2.1, 13.2.2, 13.2.2.2, 13.2.2.3, 13.2.2.4, 13.3.1, 13.3.2, 13.3.3, 13.3.4, 13.3.4.1, 13.3.4.2, 13.3.4.3, 13.3.4.4, 13.3.4.5, 13.3.4.6, 13.3.4.7, 13.4, 13.4.1, 13.4.2, 13.4.3, 13.5.1, 13.5.2, 13.5.3, 13.5.3.1, 13.5.3.2, 13.5.3.3, 13.5.3.4, 13.6 [presence of un-accounted cash in locker and residence of Shri Dilip Dherai], 13.7, 13.8, 13.8.1, 13.8.2, 13.8.3, 13.8.3.1, 13.8.3.2, 13.8.3.3, 13.8.3.4, 13.9, 13.10, 14, 15.1, 15.1.1, 15.1.2, 15.1.3, 15.1.4, 15.1.5, 15.1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is the 'main person' doing the land purchases [refer to statement on oath of Shri Prakash Chandra Shukla (supra)] and since the Hon'ble ITAT is itself stating 'the possibility' - then in such a situation, the proper course is to keep the 'Protective Assessment' alive/operative till matters reach finality at the Hon'ble Supreme Court as held by Hon'ble Gujarat High Court in the case of CIT, Gujarat II V. Surendra Gulabchand Modi 140 ITR 517 (Guj) 1983. Lastly, the Income Tax Department has six months from the date of receipt of order of Hon'ble ITAT to file appeal in the Hon.'ble High Courtthe issue is pending and no contrary/adverse view can be taken of this as the time for filing appeal to Hon'ble High Court subsists and is wideopen as of date - when these written submissions are being filed on 11th June, 2013 - the time limit expiring on 25.8.2013 [as informed by concerned A.O.] - hence the decision of Hon'ble Gujarat High Court applies squarely and the order of CIT(A) deleting the Protective assessment may kindly be se-aside and the order of A.O. restored. Further, once the Hon'ble ITAT has held in paras 18 and 24 of its order (supra) - then the only recourse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Tribunal vide their order in ITA No. 8237/Mum/2011 and other dated 22.03.2013. In the said order, the Hon'ble Tribunal has not only quashed the assessment order on technical ground but also held on merits that no addition is required to be made. From the discussion of the issue on merit made by the Hon'ble Tribunal, it is evident that the Hon'ble Tribunal is of the opinion that no cash has changed hands and, hence, no addition is required to be made on the basis of seized papers (page No. 41; para 20 onwards of the order). Since the addition in the hands of the assessee has been made on the basis of the same seized paper, the order of the Tribunal holds good in the present case also; and accordingly without going further, -the issue needs to be decided in favour of the assessee. 4. It may kindly be noted that the main purpose of protective additions is to protect the interests of the revenue -.in a case where in future it is found or held that income is belonging to different assessee. In the instant case, however, the Land Companies, in whose cases substantive additions were made, have never taken a stand that addition should be made in the hands of appellant. Hence, pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial and not as to whether it relates to the assessee. None of seized material relates the addition to the assessee. 12. The reliance of the DR on pg 46 of the ITAT order in case of Land Companies that there may be one more possibility that the persons who were doing land purchases might have inflated the sale price in these loose sheets to extract monies cannot be read in isolation. The finding of the Tribunal regarding the figures noted in the seized material being budgetary figures and no cash has changed hands are conclusive finding and the Department cannot raise any argument in the present proceedings against the same. 13. The decision relied upon by the Ld. DR in the case of CIT Gujrat-II v. Surendra Culabchand Modi (140 ITR 517) holding that Protective addition should not be deleted, is clearly distinguishable. 14. It needs to be read with the positive finding given by the Tribunal to the fact that no cash has changed the hands. Further, the Tribunal has merely listed out the possibilities and there is no conclusive finding regarding inflation of figures. Assuming for a moment that there was inflation in figures, it merely represents the attempt being made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions 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 97[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.] [(2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 158BD the emphasis was on undisclosed income" whereas under the present provision the emphasis is on money, bullion, documents etc. belonged to a person other than the person searched. In the light of the aforesaid distinction and the provisions of Sec. 153C all that has to be seen is whether the document seized from the possession of Shri Dilip Dherai belong to the assessee and whether on the strength of these documents has the AO recorded the satisfaction in consonance with the letter and spirit of the provisions of the Act. A careful perusal of the documents marked as page 1 2 of our order show that there is not a single mention of any company. It appears that the AO was in possession with the mythological power of the "Divyadrishti" possessed by Sarathi Sanjay in Mahabharat by which he could foresee and narrate the exact happenings at the Kurushetra sitting in the room of King Dridharashtra. Our reference to this mythological character is not without any basis because just by looking at the documents at page 1 2, the AO could foresee that these lands belong to 52 land companies without even knowing their names at the time of recording the satisfaction. Even in the satisfa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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.] 26[(2) Where any books of account, other documents or assets have been delivered to the requisitioning officer in accordance with the provisions of section 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 the person referred to in clause (a) or clause (b) or clause (c), as the case may be, of sub-section (1) of section 132A, had been found in the possession or control of that person in the course of a search under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decision of the Hon'ble Gujarat High Court in the case of Vijaybhai Chandrani Vs ACIT 333 ITR 436 is well founded wherein the Hon'ble Gujarat High Court has held that - allowing the petition, that admittedly, the 3 loose papers recovered during the search proceedings did not belong to the petitioner. It was not the case of the Revenue that the 3 documents were in the handwriting of the petitioners. In the circumstances, when the condition precedent for issuance of notice was not fulfilled, action taken u/s. 153C of the Act stood vitiated. The Hon'ble High Court in its order considering the usage of a document has made the following observations: "A perusal of the said documents indicates that the same contain details of members of Samutkarsh Co-Operative Hsg. Soc. The said document undoubtedly is not a document which belongs to the petitioner though there is a reference to the petitioner in one of the loose papers under the heading Samutkarsh Members. Detail indicating plot numbers, names of members and other details." 17. We find that in this decision of the Hon'ble Gujarat High Court, even when impugned documents had reference to the assessee, the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts were not found from the possession of the assessee but was found from the possession of a third person i.e. Shri Dilip Dherai. Mere mention of the names of the villages where the companies may have purchased lands would not give any basis to assume/presume/surmise that the name of the companies are mentioned in the impugned documents. The very foundation of Sec. 153C has been shaken by not fulfilling the condition precedent for the issue of notice. It is the say of the Ld DR that in the present case there is no need for recording of the satisfaction .If this plea of the DR is accepted then the legislative intent of inserting sec.153C in the Act would get defeated because the AO will get unstoppable powers to reopen assessments for 6 years in the case of the Other Person 'without recording any basis [satisfaction] for his action.Therefore this plea of the Ld DR cannot be accepted. 19. Considering the entire facts and circumstances in the light of the impugned seized documents, we have no hesitation to hold that action taken u/s. 153C of the Act is bad in law. 20. Now coming on to the merits of the case, which is without prejudice to our findings hereinabove, the submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been made and an addition has to be made on this account. To substantiate his claim, the Ld. DR has also referred to seized materials 101 to 108. According to the Ld. DR, these seized materials described the modus operandi of the group. The Ld. DR in his written submission has tried to explain the nature of transaction recorded in the seized documents 101 to 108. 21. We have considered the rival submissions on merits and perused the orders of the lower authorities. The entire assessment revolves around the statement of Shri Dilip Dherai recorded u/s. 132(4) of the Act on the date of search i.e. 5.3.2009. The relevant question which has been relied upon by the AO and the Ld. CIT(A) is as under: "Q. 24.Please note page No. 22 and page No. 23 which is kept before you. As I understand these are the statement as on 28th November, 2008 for the land purchased herein list of accounted payments are provided against each village. Please clarify the same.? Ans. These documents reflect total amounts disbursed for purchase of land. The details of area, village, payments made through cheque alongwith payments made through "cash" is shown very clearly in the chart. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s admission, it cannot be said that the assessee has incurred certain expenditure over and above what has been recorded in its books of account. We find that the ultimate conclusions drawn by the AO and the Ld. CIT(A) have been reached merely on the entries found on loose sheet of papers for which Shri Dilip Dherai has stated that they are only estimats / budgetary figures. However, the allegations made by the lower authorities are not supported by actual cash passing hands. The entire additions are based on the seized documents and no other material has been adverted to and which could conclusively show that the huge amount of the magnitude mentioned in the seized documents travelled from, one side to the other. The Revenue authorities have not brought a single statement on record of the vendors of land in different villages. None of the seller has been examined to substantiate the claim of the Revenue that extra cash has actually changed hands. 24. Our view is fortified by the decision of the Delhi High Court in the case of Malik Brothers Pvt. Ltd. Vs CIT 162 Taxmann 43 which is relied upon by the Ld. DR. In that case, the assessee purchased the property allegedly for Rs. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over and above the figure booked in the records and accounts changed hands between the parties, no addition could therefore be made u/s. 69C of the Act to the income of the assessee. Considering the entire facts brought on record, we have no hesitation to hold that even on merits, no addition could be sustained. 11. After going through the findings of the Tribunal, it is clearly seen that the Tribunal has already given a finding that no addition can be made in the hands of those companies on substantive basis on the basis of material found during the course of search. Neither there was any evidence to show that any cash has changed hand nor there was any confirmation from the sellers from whom the land in question was purchased by those 52 land companies and after analyzing all these facts the Tribunal came to the conclusion that no addition can be made in the hands of these 52 companies. 12. We have also gone through the order of the AO and the statements of Shri Dilip Dherai and others, copy of which are placed on record and found that there is no allegation against the assessee that all these land were purchased by the assessee from his own funds in the name of those land co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, no much credence can be given in respect of affidavit filed by the assessee retracting his own earlier statement, neither complex of the case is to be changed in filing of the affidavit of the assessee. 14. The next main argument of the learned DR is that since the demand is only on papers and the order of the Tribunal has not reached its finality, therefore, should be kept in abeyance. For this purpose heavy reliance was placed by the learned DR in the case of Commissioner of Income-tax v. Surendra Gulabchand Modi, (1983) 140 ITR 517 (Guj), by which it has been held that the Tribunal was not justified in proceeding with the matter and vacating the protective assessment. Accordingly, the Tribunal was directed to keep the matter pending till the decision of the Hon'ble Supreme Court. These arguments have been taken by the learned DR in his written submission and time and again has been stated that appeals of the department should be kept in abeyance till the decision of the Hon'ble Supreme Court in the case of 52 land companies, is decided. We find no much weight in these arguments because it is not known whether the department has filed any appeal even before the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch. The assessee submitted that cash of Rs.18 lakhs was found which relates to UTIPL and the balance amount of Rs.15,08,520/- was belonging to him. Since no supporting evidence was filed before the AO, accordingly, the AO made addition of Rs.18 lakhs on protective basis in the hands of the assessee and substantive addition was made in the hands of the company, M/s UTIPL. The remaining amount of Rs.15,08,520/- was treated as unexplained money under Section 69A of the Act and was added to the taxable income of the assessee on substantive basis. 17. In appeal, learned CIT(A) deleted the addition of Rs.18 lakhs by finding the fact that M/s UTIPL has admitted that the amount of Rs.18 lakhs belongs to them and, therefore, he deleted this protective addition in the hands of the assessee. However, the addition of Rs.15,08,520/- was confirmed as the assessee has declared this amount in his return. However, learned CIT(A) reduced this amount from the computation because the AO has made this addition of Rs.15,08,5250/- over and above the amount declared in the return, which included this amount of Rs.15,08,520/- also. Now, the department has challenged in deleting the addition of Rs.18 lak ..... X X X X Extracts X X X X X X X X Extracts X X X X
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