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2016 (5) TMI 278 - ITAT DELHI

2016 (5) TMI 278 - ITAT DELHI - TMI - Validity of assessment u/s 153C - Held that:- Assessing Officer of the searched person has failed to record his satisfaction that the seized documents belonged to the assessee i.e. other than the searched person. The recording of such a satisfaction is sine qua non for commencing any proceedings u/s 153C of the Act. Hence, no action could have been initiated against the assessee in absence of recording of satisfaction by the Assessing Officer of the searched .....

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notice u/s 153C of the Act has not been fulfilled and inasmuch as the condition precedent has not been met, the proceedings u/s 153C are liable to be quashed - Decided in favour of assessee - ITA No. 202/Del/2014 & ITA No. 203/Del/2014, ITA No. 416/Del/2014 - Dated:- 31-3-2016 - SHRI J.S. REDDY, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER For The Appellant : Shri Anil Jain, CA For The Respondent : Ms Nirupma Kotru, CIT DR ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER I.T.A .....

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ed in the search. The original return had been filed on 21.9.2009 declaring income of ₹ 8,53,631 for Assessment Year 2009-10. For Assessment Year 2010-11, the original return had also been filed on 21.9.2009 declaring an income of ₹ 4,64,619/-. Notices u/s 153C of the Act were issued for both the years on 14.12.2012 and for both the years, the assessee had responded that the original return filed u/s 139 of the Act may be treated as return filed u/s 153C. It is seen that during the s .....

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d between M/s Ultra Home Construction Pvt Ltd. (Builder) & M/s Moon Buildtech l*vt. Ltd., C-119 Preet Vihar Delhi-92 (Investor) - for investment in two flats at Amrapali Platinum, Tower, 1495 sqft. For ₹ 42,00,000/- which has been paid by investor as per following details. Cheque No. Date Amount in Rupees Tower NoJ Flat No./Size Receipt No. (Issued by Builder) 605955 CASH 13.08.2008 14.08.2008 15,00,000/- 6,00,000/- Tower-D/1102/1775 Sq. Ft. 853 dated 14.08.2008 605960 CASH 22.08.2008 .....

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5,000/- is not accounted for in the books of account of M/s Moon Buildtech Pvt. Ltd. as the cost of two flats has been shown at ₹ 19,45,000/-. " 3. For Assessment Year 2010-11, the following documents were seized:- Page No. 65 to 72, Annexure - A-2, Party-AB-1 This is copy of MOU dated 16.08.2009 entered between M/s Ultra Home Construction Pvt. (Builder) & M/s Moon Buildtech Pvt. Ltd. (investor) - for investment in nine flats at Amrapali Platinum Tower, 1775 sq ft. for ₹ 2,2 .....

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No. Date Amount (in Rs.) Tower No./Flat NoJSize Receipt No. (Issued by Builder) 606936 13.06.2008 ₹ 25,00,000/- Tower-D/703/J 775 Sq. Ft. 656 dated 13.06.2008 606937 13.06.2008 ₹ 25,00,000/- Tower-D/704/1775 Sq. Ft. - Do- 606938 13.06.2008 Rs.25,00,000/- Tower-D/801/1775 Sq. Ft. - Do- 606939 13.06.2008 Rs.25,00,000/- Tower-D/803/1775 Sq. Ft. 657 dated 13.06.2008 606940 13.06.2008 Rs.25,00,000/- Tower-D/804/1775 Sq. Ft. - Do- 606941 13.06.2008 ₹ 25,00,000/- Tower-D/901/1775 Sq. .....

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wn on Syndicate Bank, Raj Nagar Ghaziabad. - Along With assured return of ₹ 5,62,500/- per month for 12 months starting from 13.09.2009 totaling to ₹ 67,50,000/- and 12 cheques have also issued. - In case of delay/bouncing of cheque on the part of builder penalty of 4% per month. 4. For Assessment Year 2009-10, the assessment was completed at a taxable income of ₹ 39,90,631/- after making additions as under:- (i) ₹ 22,55,000/- u/s 68 of the Act on account of undisclosed i .....

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late Authority, the assessee, besides contesting the issue on the merits of addition, also challenged the assessment on the legal ground that the Assessing Officer had erred in fact and law in initiating the assessment proceedings under the provisions of section 153C of the Act only on the basis of Memorandum of Understanding (MOU) seized during the course of search and seizure operation of a third party on the assumption that the same belonged to the assessee whereas the presumption u/s 132(4A) .....

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then be taken up u/s 153C against such other persons to whom the valuables or books / documents belong. Two, the commencement, conclusion and the period to which the proceeding u/s 153C relate can be determined from the date of Handing over. Thus, when the AO of the person searched and the person against whom proceeding u/s 153C is initiated are the same, it is not necessary that the reasons should be recorded in the specific file of the person searched so as to establish that the satisfaction .....

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to name or there is a misdescription of the name, the proceeding will be liable to be challenged and corrected by giving notice to the assessee subject to such just exceptions as an assessee can take under law. It has further held in Isha Beevi v. TRO [1975] 101 ITR 449 that Where the power to proceed is actually there, the mere reference to a wrong section for authority to act will not vitiate the action taken. It is not enough if a wrong section or provision of law is cited in a notice or orde .....

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ccounted money / income in the hands of the appellant also arose. The AO of the appellant is also the AO of UHC and Sh. Shiv Priya. In both these cases assessments have been completed u/s 153A. Therefore, recording of the satisfaction by the AO on 14.12.2012, even in the manner it has been recorded, cannot lead to the conclusion that satisfaction was not recorded by the AO of the person searched, i.e. Sh. Shiv Priya. In my respectful view, this is the correct legal position in the matter. 3.6 In .....

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back u/s 69A of the Act and ₹ 34,20,000/- on account of alleged assured return. 9. Now, the assessee is in appeal for Assessment Years 2009- 10 and 2010-11 challenging first and foremost the initiation of proceedings u/s 153C of the Act. The assessee has also challenged the sustenance of addition of ₹ 22,50,000/- on merits for Assessment Year 2009-10 and of ₹ 11,47,500/- on merits for Assessment Year 2010-11 whereas the Department is in appeal in Assessment Year 2010-11 challe .....

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of proceedings u/s 153C of the Act first and the hearing on merits will be taken up at a later stage if it is so required. 11. The Ld. AR submitted that the initiation of proceedings u/s 153C for both the Assessment Years were bad and illegal in law and the assessments framed were against the statutory provisions of the Act and were made without complying with the procedure prescribed in section 153C. He submitted that no satisfaction note has been recorded that the documents belong to the third .....

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nd assess or reassess income of such other person in accordance with the provisions of section 153A. The Ld. AR submitted that in the present case in the alleged satisfaction note nowhere it has been recorded that the seized documents in the shape of MOU belong to the third party i.e. M/s Moon Buildtech Pvt. Ltd. which is the basic condition as observed from the language of the section 153C. The Ld. AR further submitted that the Hon ble Delhi High Court has held in the case of Pepsi Foods Pvt. L .....

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AO 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, the document is handed over to the AO of the person to whom the said documents "belong". The Ld. AR further submitted that in the present appeals, the first step itself has not been fulfilled. The Ld. AR also submitted that section 132(4A)(i) clearly stipulates that when any docum .....

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so relied on the judgment of the Hon ble Delhi High Court in the case of Pepsico India Holdings (P) Ltd. Vs ACIT 270 ITR 467 for the preposition that the MOU seized did not belong to the assessee. The Ld. AR further submitted that no satisfaction was recorded as the Assessing Officer of the searched person but as the AO of the third party i.e. the assessee. The Ld. AR relied on the judgment of the Hon ble Delhi High Court in the case of CIT vs. Aakash Arogya Mandir Pvt. Ltd. in ITA No. 509/2015 .....

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s. The Ld. DR further submitted that the impugned MOU mentioned the name of the assessee and, therefore, the onus was on the assessee to disprove that the document did not belong to him. The Ld. DR relied heavily on the order of the Ld. CIT (A) and submitted that the same should be upheld. 13. We have heard the rival submissions and carefully perused the relevant material on record. It is seen that the extract of satisfaction note recorded for initiation of proceedings u/s 153C of the Income Tax .....

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f section 153C reveals that section 153C permits the issuance of a notice by the Assessing Officer of a person who has not been searched on the basis of satisfaction note prepared by the Assessing Officer of a searched person indicating that during the search, certain documents belonging to the other person (the person not searched) were found. However, before a notice u/s 153C can be issued in the manner indicated, the Assessing Officer of the searched person must arrive at a positive satisfact .....

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tisfaction that the seized document does not belong to the searched person but to the other person. The Hon'ble Delhi High Court has discussed the provision of section 153C in Pepsi Foods (P) Ltd. vs ACIT 270 CTR 459 in Para 6 as under:- 6. On a plain reading of s. 153C, it is evident that the AO 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 AO .....

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atisfaction 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 AO 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. Sec. 132(4A)(i) cle .....

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ument in fact belongs to somebody else. There must be some cogent material available with the Assessing Officer before he/she arrives at the satisfaction that the seized document does not belong to the searched person but to somebody else. Surmise and conjecture cannot take the place of satisfaction . 14. A perusal of the satisfaction note in the present appeals would show that nowhere has it been recorded that the seized documents in the form of MOU belong to the third party i.e. M/s Moon Build .....

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satisfaction is recorded in the case of person searched or the other person. In our considered opinion, this contention advanced on behalf of the revenue is devoid of any merit. We fail to comprehend as to how the requirement of recording satisfaction by the AO of the person searched provided by the statute can be substituted with anything else. There is an underlying rationale in providing for recording of such satisfaction by the AO of the person searched. As the money, bullion, jewellery, bo .....

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he others and thus handed over to the concerned AOs of the person searched and others for making assessment. It is only the AO of the person searched who can reach a conclusion that some of the documents etc. do not belong to the person searched but to some other person, the legislature has provided for recording of such satisfaction by the AO of the person searched. It is not permissible under the law to require the AO of the other person to record such satisfaction by the AO. 15. As regards th .....

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t is relevant for this purpose is not the identity of the person assessing but his position and the capacity. When the law requires the AO of the person searched to record the necessary satisfaction, it is the AO having the jurisdiction over the person searched who is bound to record such satisfaction in the capacity of that AO and that too in the case of the person searched. The mere fact that the AO of the person searched and the assessee is the same person, does not, in any manner, obliterate .....

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