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The Senate Versus Deputy Commissioner of Income-tax

Validity of assessment u/s 153C - real owner of the document seized - presumption - Held that:- The satisfaction note recorded by the AO is identical for all the years except for difference in the assessment year. From the material seized, though there was a reference to the name of the assessee-firm, equally there are some documents which do not even contain name of the assessee-firm but there is nothing to indicate that these documents were disclaimed by Indian Builders Corporation in whose ca .....

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presumption was not rebutted by the AO of the searched person. Therefore, it cannot be said that assessee-firm is the owner of the seized material based on which the impugned additions were made. Furthermore, even in terms of law laid down by the Hon’ble Supreme Court in the cases of Bishwanath Chatterjee [1976 (4) TMI 1 - SUPREME Court ] and late Nawab Sir Mir Osman Ali Khan [1986 (10) TMI 2 - SUPREME Court ], assessee-firm cannot be said to be the owner of the document seized. - Decided in fav .....

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are disposed of by this common order for the sake of convenience. 2. The assessee raised the following common grounds of appeal: 1. That the order of the learned CIT(A) in so far it is prejudicial to the interests of the appellant is bad and erroneous in law and against the facts and circumstances of the case. 2. Validity of assessment u/s 153C 2.1 That the learned CIT(A) erred in law and on facts in holding that the assessment made under 153C of the Act is valid even though the additions made i .....

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l is not utilized in the business of the appellant and such a finding is perverse as not being supported by any evidences on record and are contrary to the materials on record. 2.4 That the learned CIT(A) erred in law and on facts in holding that the satisfaction recorded by the learned assessing officer to invoke the jurisdiction u/s 153C of the Act is valid. 3. That the learned CIT(A) erred in law and on facts in holding that the interest is not allowable u/s 36 of the Act. 4. That the learned .....

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gnoring the fact that these documents were given to Mr. Yunus Zia as a partner of Senate and such documents belonged only to Mr. Yunus Zia and not to the appellant. 6.2 That the learned CIT(A) erred in law and on facts in holding that the assessment u/s 153C r.w.s 153A of the Act is valid even though the documents seized in the premises of Mr. Yunus Zia did not belong to the appellant. Each of the above grounds is without prejudice to one another and the appellant craves leave of the learned Hon .....

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poration, S/Shri Ziaulla Sheriff and Yunus Zia on 17/06/2008. During the course of search and seizure operation, certain loose papers were seized. These loose papers are said to be belonging to the assessee-firm. Based on this material, notice u/s 153C of the Act was issued for the above assessment years on 15/06/2009. The assessments were completed after making several disallowances. 4. Being aggrieved, appeals were filed before the CIT(A). It was contended, inter alia, before the CIT(A) that s .....

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opies of satisfactory note as recorded by the AO were also forwarded to the assessee-firm. As regards the assessee-firm s argument that addition has no reference to seized material, the CIT(A) held that once the documents belonging to the assessee are found, it is sufficient to assume jurisdiction u/s 153C. It is not necessary that the additions made should be with reference to seized document. In support of this contention, the CIT(A) placed reliance on the decision of the Hon ble Delhi High Co .....

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al in earlier years cannot operate as res judicata as each assessment year is distinct and different. Therefore, he confirmed the addition. 5. Being aggrieved, assessee-firm is in appeal before us in the present appeals. The assessee-firm had raised the following additional grounds for the assessment year 2003-04 to 2008-09 before us: The appellant herein seeks the leave of the Hon'ble Tribunal to file the following additional grounds: 1. That the learned CIT(A) erred in law and on facts in .....

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dmitted as they are purely legal in nature and can be decided on the basis of the existing facts on record. The fact that Mr. Yunus Zia is a partner of the appellant is on record. The appellant was under a bonafide belief that the earlier submissions made before the Commissioner of Income Tax (Appeals) would cover this issue in view of the additional grounds no. I and 2 filed before the CIT(A). The appellant has now been advised that it would be advisable to file a separate additional ground cov .....

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orporation (229 ITR 383). The learned Departmental Representative has no objection for admission of additional ground. 6. We have considered rival submissions. As the additional grounds raised are purely questions of law and does not require any investigation of facts and go to the root of the very jurisdiction of the matter, we are of the considered opinion that in order to render justice, the additional grounds filed are admitted in light of the ratio laid down by the Hon ble Apex Court in the .....

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e operations which are relied upon for making impugned assessments does not belong to the assessee-firm. He further argued that the seized material does not bear any signature or date and finally, he argued that the satisfaction note recorded is not a satisfaction as required under the provisions of section 153C of the Act inasmuch as the satisfaction note does not indicate that the seized material belongs to the assessee-firm. In support of this proposition, he relied upon the Hon'ble High .....

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assuming jurisdiction u/s 153C, it is not necessary that the documents seized should contain incriminating information. It is sufficient compliance if the documents belong to the person other than searched person. It was submitted that the seized documents belong to the assessee-firm. Therefore he argued that assumption of jurisdiction by the AO u/s 153C is valid in law. He submitted that the seized documents which is marked as A/YZS/10 page 25 is a profit & loss account of Tricolor Hotel, .....

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s a statement of total income, operational expenses, gross profit etc. of the assessee firm. Similarly, the seized document A/YZS/15 Page 74 shows an analysis of the profit & loss A/c. of the assessee for the period Feb.2008. This and all the other material seized as per the above table relate to financial transactions of the assessee and have a direct bearing on the determination of total income of the assessee for the respective Assessment years. In view of the aforementioned documents/loo .....

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s valid in law or not? Therefore, it is necessary to refer to the provisions of sections 153A, 153B and 153C of the Act which are reproduced hereunder: 153A. Assessment in case of search or requisition.- Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day .....

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rn required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year falling withi .....

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f an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year. 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 assessment or reassessment,- (a) in respect of each assessment year falling within six assessment years referred to in clause (b) of section 153A, within a period of two years from the end of the financia .....

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r person referred to in section 153C, the period of limitation for making the assessment or reassessment shall be the period as referred to in clause (a) or clause (b) of this sub-section or one year 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 .....

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y to the assessee of being re-heard under the proviso to section 129; or (iv) in a case where an application made before the Settlement Commission under section 245C is rejected by it or is not allowed to be proceeded with by it, the period commencing from the date on which such application is made and ending with the date on which the order under sub-section (1) of section 245D is received by the Commissioner under sub-section (2) of that section, shall be excluded: Provided that where immediat .....

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ave been executed,- (a) in the case of search, on the conclusion of search as recorded in the last panchnama drawn in relation to any person in whose case the warrant of authorisation has been issued; (b) in the case of requisition under section 132A, on the actual receipt of the books of account or other documents or assets by the Authorised Officer. Assessment of income of any other person. 153C. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, sect .....

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person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for 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 th .....

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ion over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year- (a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-sectio .....

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section 153A. 9. The controversy in the present appeals relates to interpretation of the provisions of sec.153C of the Act. On plain reading of the above provision, it is clear that the provisions of sections153A, 153B and 153C lay down scheme of assessment in the case of search and requisition u/ss.132 and 132A of the Act. The provisions of sec.153A deal with the procedure for issue of notice in the case of a person where search u/s 132 or books of account or other documents or assets are requ .....

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e of such other person. 9.1 From bare reading of the provisions of sec.153C it is crystal clear that the condition precedent for issue of notice u/s 153C is that money, bullion, jewellery or other valuable article or thing or books of account or document seized or requisitioned should belong to such person. If this requirement is not satisfied, recourse cannot be had to the provisions of sec.153C. The very same provisions had come for interpretation before the Hon ble Delhi High Court in the cas .....

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erson (other than the searched person). Furthermore, it is only after such handing over that the Assessing Officer of such other person can issue a notice to that person and assess or re- assess 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 bel .....

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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 belongs to that person. It is for the Assessing Officer to rebut that presumption and come to a conclusion or satisfaction that the document in fact belongs to somebody else. There must .....

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which would indicate as to how the presumptions which are to be normally raised as indicated above, have been rebutted by the Assessing Officer. Mere use or mention of the word satisfaction or the words I am satisfied in the order or the note would not meet the requirement of the concept of satisfaction as used in Section 153C of the said Act. The satisfaction note itself must display the reasons or basis for the conclusion that the Assessing Officer of the searched person is satisfied that the .....

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in the case of Bishwanath Chattejee [1976] 103 ITR 536 (page 539): "The expression 'belong' has been defined as follows in the Oxford English Dictionary :-'To be the property or rightful possession of.' So it is the property of a person, or that which is in his possession as of right, which is liable to wealth-tax. In other words, the liability to wealthtax arises out of ownership of the asset, and not otherwise. Mere possession, or joint possession, unaccompanied by the ri .....

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of the particular facts of a case. The Patna High Court in Addl. CIT v. Sahay Properties and Investment Co. P. Ltd. [1983] 144 JTR 357 was concerned with the construction of the expression 'owner' in section 22 of the Income-tax Act, 1961. There, the assessee had paid the consideration in full and had been in exclusive and absolute possession of the property, and had been empowered to dispose of or even alienate the property. The assessee had the right to get the conveyance duly registe .....

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ase of Pepsico India Holdings P. Ltd. vs. ACIT (370 ITR 295) following its earlier decision in the case of Pepsi Foods P. Ltd (supra) held that unless it is established that the documents in question do not belong to the searched person, the question of invoking the provisions of sec.153C of the Act does not arise. It was also held that unless searched person disclaims the documents as belonging to him, provisions of sec.153C do not get attracted. It is also further laid down that in the satisfa .....

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nt out, once again, that it is nobody s case that the Jaipuria Group had disclaimed these documents as belonging 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 s .....

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ns, 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. Secondly, we may also observe that the finding of photocopies in the possession of a searched person does not necessarily mean and imply that they belong‟ to the person who holds the originals. Possession of documents and posses .....

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t confuse the expression belongs to‟ with the expressions relates to‟ or refers to‟. A registered sale deed, for example, belongs to‟ the purchaser of the property although it obviously relates to‟ or refers to‟ the vendor. In this example if the purchasers premises are searched and the registered sale deed is seized, it cannot be said that it belongs to‟ the vendor just because his name is mentioned in the document. In the converse case if the vendor s .....

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he ingredients of Section 153C of the said Act have been satisfied in this case. Consequently the notices dated 02.08.2013 issued under Section 153C of the said Act are quashed. Accordingly all proceedings pursuant thereto stand quashed. 9.4 Similarly, the Hon ble Gujarat High Court in the case of Vijaybhai N.Chandrani vs. ACIT (333 ITR 436) held that even if there is a reference to the assessee in the seized documents, it does not mean that the assessee is the owner of those documents unless th .....

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f the Act. Examining the facts of the present case in the light of the aforesaid statutory scheme, it is an admitted position as emerging from the record of the case, that the documents in question, namely the three loose papers recovered during the search proceedings do not belong to the petitioner. It may be that there is a reference to the petitioner in as much as his name is reflected in the list under the heading 'Samutkarsh Members Details' and certain details are given under diffe .....

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stablishes that the assessee is the owner of the seized documents, provisions of sec.153C cannot be invoked. Even the Hon ble Delhi High Court as well as the Hon ble Gujarat High Courts held that merely because there is a reference to the name of the assessee in the seized documents, it does not mean that the assessee is the owner of those documents. In the satisfactory note recorded by the AO there should be something to indicate that the searched person had disclaimed those documents and there .....

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present case, satisfaction note recorded by the AO reads as under: Satisfaction Note for initiating action u/s 153C Action u/s 132 was conducted in the case of India Builders Corporation and its Group based on the authorization issued by the Addl.CIT (Inv)-I, Bangalore vide warrant No.1017 dated 17.06.2008. During the course of search in the case of Indian Builders Corporation the following book/documents were found and seized u/s 132 Exhibit I.D A/YZS 10 A/YZS/15 On a scrutiny of the above docu .....

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irm but there is nothing to indicate that these documents were disclaimed by Indian Builders Corporation in whose case search was conducted. The AO has not referred to any material to indicate that the assessee is the owner of those seized documents. Therefore, the presumption cast under provisions of section 132(4A) of the Act, comes into play. The said provision stipulates that where any document is found in the possession or control of any person in the course of search it may be presumed tha .....

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id to be the owner of the document seized. Therefore, it cannot be said that the requirements of sec.153C are fulfilled in the present case in terms of law laid down by the Hon ble Delhi High Court in the cases cited supra as well as by the Hon ble Gujarat High Court in the case cited supra. Therefore, we hold that the AO was not justified in exercising jurisdiction u/s 153C of the Act. Hence, the assessments made pursuant to issue of notice u/s 153C are hereby cancelled for the assessment years .....

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