TMI Blog2014 (12) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of the material and disclosures of the person with which the articles or assets are found and not in respect of the person who whom they belong. In DSL Properties Pvt. Ltd. Vs. DCIT [2013 (9) TMI 123 - ITAT DELHI] it has been held that if the AO is assessing the person searched as well as other person whose assets, books of account or documents were found at the time of search, then also, first while making the assessment in the case of the person searched, he has to record the satisfaction that the money bullion, jewellery or other valuable article or thing or books of account or documents belonged to the person other than the person searched - Then the copy of this satisfaction note is to be placed in the file of such other person and the relevant document should also be transferred from the file of the person searched to the file of such other person - the documents referred to in section 153C which is found during the search u/s. 132, which are seized or requisitioned belongs to a person other than the person searched and there should be a clear finding to that effect based on which only satisfaction as envisaged u/s. 153C can be inferred – there was no mention of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was issued by the AO to the assessee giving one more opportunity to attend the hearing and furnish necessary details. This notice was also remained uncomplied with. In the event of continuous non-cooperation and keeping in view the limitation in the matter, notice u/s 144 dated 19.11.2010 was issued by the AO, giving the assessee last opportunity to furnish the required details for the completion of assessment. The AR of the assessee furnished details in the AO's office on from time to time and declared Nil income. The details filed by the assessee company had been examined by the AO. The assessee company was engaged in the business of money lending, financing activities etc apart from this assessee has received rental income. The AO was of the opinion that since the assessee is not in the business of constructing and letting the property on rent. Furthermore, the assessee itself has shown the rental income as Income from House Property. In such circumstances this expenditure cannot be claimed as business expenditure u/s 37 of the Act because it is directly related to the rental income and not to the business of the assessee. The expenditure incurred by an assessee for securin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not allowable to the assessee. (ii) the assessee has paid an interest of ₹ 13,32,932/-to M/s Kapoor Enterprises whereas from the documents filed by the assessee suggested that the assessee has diverted money to its group concerns, interest paid to M/s. Kapoor Enterprises cannot be allowed as deduction, therefore addition of ₹ 13,32,932/- was made. The total disallowance of interest i.e. ₹ 1,37,38,743/- plus ₹ 13,32,932/- comes to ₹ 1,50,71,675/- whereas the Ld. A.O. has disallowed interest of ₹ 1,51,30,528/- therefore excess disallowance of ₹ 58,853/- was made in addition to what has been disallowed by him earlier. The AO has further disallowed the claim of interest of the assessee paid to various banks holding that the interest received of ₹ 80,00,000/- against the total interest paid of ₹ 1,61,27,877/- will be allowed as an expense and a sum of ₹ 81,27,877/- shall be disallowed and the disallowance was made. The AO further disallowed the amount of ₹ 1,62,645/- debited to the P L A/c holding that the same is debited under the head of deferred revenue expenditure and the IT Act does not recognize the concept of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,645/- debited to the P L a/c as deferred revenue expenditure holding that the income tax act does not recognizes the concept of deferred revenue expenditure. Income as per return Rs.8,63,100.00 Add: Disallowance out of the interest paid to bank Rs.76,91,609.00 Deferred revenue expenditure Rs.1,62,645.00 Disallowance out of the interest paid to persons other than bank Rs.1,96,95,907.00 Loss on non allotment of property being disallowed Rs.36,00,000.00 Rs.3,11,50,161.00 Rs.2,31,50,161.00 Less: Interest charged in Assessment Year 2007-08 Rs.80,00,000.00 Rs.2,40,13,261.00 11. Pursuant to the notice the assessee has filed its return of income for A.Y. 2009-10 on 23.08.2010/30.09.2009 declaring income of ₹ 1,47,88,292/-. While completing the assessment, the A.O. has made addition of ₹ 57,57,700/- by way of disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se has not been passed on the basis of material seized pursuant to an action taken under section 132 of the Income Tax Act, 1961. 3. The order of the CIT(A) on the facts and circumstances of the case is perverse as it does not taken into consideration the relevant documents brought on record and submission of the appellant. 4. That CIT(A) has erred on the facts and law in confirming the addition of ₹ 64,12,908/- made by the AO is not allowing the professional and legal charges paid by the appellant. 5. The CIT(A) has erred on the facts and law in confirming the addition of ₹ 2,1 9,250/0- made by the AO in not allowing the lease deed expenses. 6. The CIT(A) has erred on the facts and law in not considering that the expenses of ₹ 64,12,908/- on account of professional and legal charges and of ₹ 2,19,250/- on account of lease deed expenses pertained to business of the appellant and is therefore to be allowed as a eligible business expenditure. 7. The CIT(A) has erred on the facts and law in confirming the addition of ₹ 35,97,905/- made by the AO in not allowing interest expenses. 8. The CIT(A) has erred on the facts and law in not consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2014. On the other hand the ld DR, supported the order of the ld CIT(A). 18. We have heard the rival submission and carefully gone through the records and the case laws cited before us. The main issue that was raised by the assessee company is that assumption of jurisdiction by the AO before issuing notice u/s 153C of the Act is not in accordance to law and so the subsequent assessment is void-ab-initio and should be quashed being quarum-non-judice. For buttressing the said ground, the ld counsel for the assessee brought to our notice the law laid by the Hon ble jurisdictional High Court in Pepsi Foods (P) Ltd. Vs. Asstt. CIT(WP(C) No. 415 of 2014 dated 07.08.2014 after examining the provision of Section 153C, 132 (4A)(i) and 292 (i)ii of the Act, the Hon ble High Court had held as under:- 6. On a plain reading of Section 153C, it is evident that the Assessing Officer of the searched person must be satisfied that inter alia any document seized or requisitioned belongs to a person other than the searched person. It is only then that the Assessing Officer of the searched person can handover such document to the Assessing Officer having jurisdiction over such other person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easons or basis for the conclusion that the Assessing Officer of the searched person is satisfied that the seized documents belong to a person other than the searched person. We are afraid, that going through the contents of the satisfaction note, we are unable to discern any satisfaction of the kind required under Section 153C of the said Act. 19. In the light of the said ratio-decidendi of the aforesaid order of the Hon ble High Court, the ld counsel for assessee, submitted that the first step itself has not been fulfilled. So according to the ld counsel, the issuance of notice u/s 153C is illegal. Further it was pointed out by the ld counsel, the from a perusal of the purported satisfaction note recorded by the AO, it can be noted that the nnexure-45 which is the Hard Disc containing documents discovered at the premises of Global Reality ventures Pvt. Ltd , against which there is no indication whatsoever that the assessment proceedings in the case of Global Reality Ventures Pvt. Ltd were in progress or not, at that point of time and that AO during the course of that proceedings recorded this satisfaction. In order to support this contentions, the ld counsel brought to o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of account belonging to the assessee, as sought to have been made out in the Satisfaction Note. This demonstrates that, the Satisfaction Note which says that books of accounts are contained in the hard disk, is a wrong recording of facts. The entire cash book or the bank book is not available in the hard disk. What was available in the hard disk was confirmation of accounts given by the assessee to Global Reality Ventures and statement of accounts, ledger etc. in support of the same. The relevant portion of the cash book, where the entries of Global Reality Ventures Ltd. are recorded was also there in the hard disk. Thus to hold that the hard disk contains books of accounts of M/s V.K. Fiscal Services P. Ltd. is prima facie wrong. Thus, in our view no money, bullion, jewellery or other valuable articles or books of accounts or documents seized belong to the assessee, warranting issual of notice u/s 153 C'. 11.2. Hence we uphold the contention of the assessee that the issual of notice u/s 153'C', under the facts and circumstances, is bad in law. 20. We also take note of the recent judgement of the Hon ble jurisdictional High Court in a similar case in Pepsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing wrong in the satisfaction note and the forwarding of the entire matter by the Income Tax Officer, Ward-Ill (2), Ahmedabad to the Assessing Officer of the petitioner at Bareilly. All the requirements of Section 153(c) were complied with by the Income Tax Officer, Ward-Ill (2), Ahmedabad. A search under Section 132A was carried out and bullion was seized. The case was selected for compulsory scrutiny for six assessment years. The assessee established that the seized silver belongs to M/s Sarvesh Jewellers, Bareilly - the petitioner. The ownership and consignment of the petitioner was also confirmed by the Assessing Officer of the petitioner at Bareilly. The Income Tax Officer, Ward-Ill (2), Ahmedabad did not commit any error in law, in recording the satisfaction note requesting the petitioner s Assessing officer to proceed under Section 153(c) of the LT. Act. 21. After the assessment of the person in respect of whom search action was carried out is completed, the officer under Section 153C, where he find that seized articles belong to some other person, has to forward a satisfaction note to the Assessing Officer on such person. The satisfaction in such case is in respect of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to them. Unless and until it is established that the documents do not belong to the searched person, the provisions of Section 153C of the said Act do not get attracted because the very expression used in Section 153C of the said Act is that where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A .... In view of this phrase, it is necessary that before the provisions of Section 153C of the said Act can be invoked, the Assessing Officer of the searched person must be satisfied that the seized material (which includes documents) does not belong to the person referred to in Section 153A (i.e., the searched person). In the Satisfaction Note, which is the subject matter of these writ petitions, there is nothing therein to indicate that the seized documents do not belong to the Jaipuria Group. This is even apart from the fact that, as we have noted above, there is no disclaimer on the part of the Jaipuria Group insofar as these documents are concerned. 15. Secondly, we may also observe that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cuments were found at the time of search, then also, first while making the assessment in the case of the person searched, he has to record the satisfaction that the money bullion, jewellery or other valuable article or thing or books of account or documents belonged to the person other than the person searched. Then the copy of this satisfaction note is to be placed in the file of such other person and the relevant document should also be transferred from the file of the person searched to the file of such other person. Thereafter, in the capacity of the Assessing Officer of such other person, he has to issue the notice u/s 153A read with section 153C. The Assessing Officer of the searched person and such other person may be the same but these are two different assessees and therefore the Assessing Officer has to carry out the dual exercise first as the Assessing Officer of the person searched in which he has to record the satisfaction, during the course of assessment order proceedings of the person searched. We concur with the said view of the coordinate Bench and would like to add that this satisfaction must be an objective satisfaction based on an enquiry by the AO to establish ..... X X X X Extracts X X X X X X X X Extracts X X X X
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