Feedback   New User   Login      
Tax Management India. Com TMI - Tax Management India. Com
Home Acts / Rules Notifications Circulars Tariff/ ITC HSN Forms Case Laws Manuals Short Notes Articles News Highlights
Extracts
Home List
← Previous Next →

Principal Commissioner of Income Tax (Central) -2 Versus Index Securities Private Limited, Vidya Shankar Investment Private Limited

2017 (9) TMI 585 - DELHI HIGH COURT

Revision u/s 153C - no incriminating material found during the course of search - Held that:- In the present case, the two seized documents referred to in the Satisfaction Note in the case of each Assessee are the trial balance and balance sheet for a period of five months in 2010. In the first place, they do not relate to the AYs for which the assessments were reopened in the case of both assessee's. Secondly, they cannot be said to be incriminating. Even for the AY to which they related, i.e. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d. In any event, a detailed analysis has been undertaken by the CIT (A) of the materials produced by the Assessee which justified the deletion of such additions. Even on this score, no interference is warranted with the impugned order of the CIT (A). - ITA No. 566/2017, ITA No. 567/2017, ITA No. 568/2017, ITA No. 569/2017, ITA No. 570/2017, ITA No. 571/2017, - Dated:- 4-9-2017 - S. MURALIDHAR & PRATHIBA M. SINGH JJ. Appellant Through: Mr. Ashok K. Manchanda, Senior Standing counsel with Mr. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

set of appeals involving two different Assessees but arising out of more or less the same set of facts and involving identical questions of law. Consequently, these appeals are being disposed of by this common order. 3. ITA Nos. 566/2017, 570/2017 and 571/2017, in which the Respondent Assessee is Index Securities Private Limited ( ISRPL ), are directed against the order dated 26th August 2016 passed by the ITAT in ITA Nos. 430 to 432/Del/2014 for the Assessment Years ( AY ) 2007-08, 2008-09 and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

als) [ CIT (A) ] which held that no proceeding under Section 153C could have been initiated against the Assessees for the AYs in question since no incriminating documents belonging to the Assessee and relating to the AYs in question were found during search. Cases relating to ISRPL 6. As far as the Assessee, ISRPL, is concerned, the background facts are that on 14th September 2010 a search and seizure operation was conducted by the Investigation Wing of the Income Tax Department on the Jagat Gro .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

13: During the course of the assessment proceedings in the case of M/s. Jagat Agro Commodities (P) Limited, it was noticed that during the search and seizure operation under Section 132 undertaken on 14th September 2010 in the case of M/s. Jagat Agro Commodities (P) Limited at 802, Ambadeep Building, K.G. Marg, New Delhi, a number of documents were found and seized from the above premises. Page No. 97 and 98 of Annexure A-17 were seized by party J-5. The seized documents contain trial balance an .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

C was issued to ISRPL seeking to reopen the assessment for the AYs 2005-06 to 2010-11. 9. The objection by ISRPL to the reopening of the assessments for the aforementioned AYs was rejected by the AO and an assessment order dated 28th March 2013 under Section 143 (3) read with Section 153C of the Act was passed separately for each of the AYs. As far as AY 2007-08 was concerned, the AO made an addition of ₹ 48,51,87,000 representing the share application money received from 16 investors. As .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he CIT (A), by separate orders, allowed the appeals in respect of each of the AYs. One of the grounds urged before the CIT (A) was that there was no valid assumption of jurisdiction under Section 153C of the Act since the Revenue had failed to establish that the documents seized belonged to the Assessee. Further, since the assessment for the relevant AY already stood completed before the search took place, it was urged that the AO had erred in invoking jurisdiction under Section 153C without the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n ; (ii) copy of balance sheet in respect of each of the investors/lenders; (iii) copy of the bank statement; (iv) copy of the ITR for the AYs in question; (v) copy of the annual report of the entity for each of the relevant AYs; (vi) copy of the reply filed in response to summons issued under Section 131 of the Act. Order of the CIT (A) in the appeals by ISRPL 12. The CIT (A) came to the following conclusions: (a) Annexure A-17 containing page nos. 97 and 98 were found and seized from the searc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nducted thereafter on 14th September 2010. For the said two AYs the trail balance and balance sheet were already perused by the AO when he framed the assessment for the said AYs under Section 143 (3) of the Act. (c) As far as AY 2010-11 was concerned, the return had been processed under Section 143 (1) of the Act. In any event, the said documents which pertained to the Assessee but did not belong to it were not relevant for AY 2010-11 but to AY 2011-12. The documents not at all incriminating doc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cord any adverse material to disprove the documents submitted by the Assessee. Further, the CIT (A) observed that it is also surprising to find that, the Assessing Officer did not mention a word about the enquiry that has been conducted by him by issuing summons u/s 131 to the two share holders in his assessment order dated 28.03.2013. Without bringing any material on record in support of his observation or enquiry, the Assessing Officer made an addition of the entire share capital and share pre .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

served that the AO failed to unearth any wrong or illegal dealings by the appellant and therefore, it would be miscarriage of justice if he harboured any suspicion to treat the subscribed share capital and share premium as undisclosed income of the appellant company. (i) A reference was made to the materials (Annexures A-19 to A-24) seized from the residential premises of Surender Kumar Jain and Virender Kumar Jain purportedly representing date wise cash books containing narration regarding cash .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. These transactions pertained to AY 2010-11 but the AO did not mention even a word about them in the assessment order for AY 2010-11 which he would have if he found them relevant. (j) The CIT (A) further held that the AO simply reproduced the contents of paras 6 to 10 from the appraisal report without co-relating the specific seized material pertaining to the Assessee. The AO did not bring any evidence on record to show that the share capital received by the Assessee during the year was bogus a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e Tax-7 v. RRJ Securities Limited [2016] 380 ITR 612 (Del) and held that the CIT (A) was justified in holding that the proceedings initiated under Section 153C of the Act were not valid. 14. The ITAT found that, in the first place, the documents at Pages 97 and 98 of Annexure A-17 which were seized from the premises of the searched person did not 'belong' to the Assessee. Further, the said documents did not relate to the AYs in question i.e. AYs 2007-08, 2008-09 and 2010-11. Also, the sa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

view of the fact that the ITAT agreed with the CIT (A) that the assumption of jurisdiction under Section 153 C of the Act was erroneous, the ITAT did not examine the other grounds raised by the Revenue. Cases relating to Vidhya Shankar Investment Pvt. Ltd. 15. In the case of VSIPL, the satisfaction note drawn up by its AO reads thus: During the course of assessment proceedings in the case of M/s. Jagat Agro Commodities Pvt. Ltd. it was noticed that during the search and seizure operation under S .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

centralized to this Circle vide Letter F.No. CIT (C)-III/127/CC19/2010-11/2553 dated 5th February 2013. I am satisfied that the documents referred to above belong to M/s. Vidhya Shankar Investments Pvt. Ltd., warranting action under Section 153C in this case. 16. Here again, it is seen that two seized documents, which were at Pages 94 and 95 of Annexure A-17 were the trial balance and balance sheet of VSIPL for the period 1st April 2010 to 4th September 2010. On the basis of the satisfaction no .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ors; for AY 2008-09, the AO made an addition of ₹ 7,75,50,000/- representing share application money received from 29 investors and for AY 2009-10, the AO made an addition of ₹ 9,73,37,500/- representing share application money received from 26 investors. 18. Against the above assessment orders, the Assessee VSIPL filed appeals before the CIT (A). By separate orders, all dated 30th September 2013, the CIT (A) came to the conclusion that the assumption of jurisdiction by the AO was ba .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d even before the date of the search. 20. The CIT (A) held that the documents seized did not constitute incriminating material for each of the AYs in question. On merits, it was found that there was no basis for making any of the additions as the Assessee had furnished information regarding for each of the investors/groups viz., copies of confirmation letters, bank statements, income tax returns, annual reports and the replies in response to the notice under Section 131 of the Act. The CIT (A) h .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of learned counsel for the Revenue 22. Mr. Ashok K. Manchanda, learned Senior standing counsel for the Revenue first submitted that notwithstanding that the search took place prior to 1st June 2015 (i.e. prior to the date of the amendment to Section 153 C) it was sufficient for the Revenue to show that the documents seized 'pertained' to the Assessee. There was no need for the Revenue to show that the seized document, in fact, belonged to the Assessee. He sought to rely on decisions in P .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

C of the Act, the Revenue need not show that the documents related to each of the AYs whose assessments were sought to be reopened. Mr. Manchanda sought to distinguish the judgment of this Court in Principal Commissioner of Income Tax Central-2, New Delhi v. Meeta Gutgutia [2017] 395 ITR 526 (Del). 24. Mr. Manchanda further sought to distinguish the recent judgment of the Supreme Court in Commissioner of Income Tax-III, Pune v. Sinhgad Technical Education Society [2017] 84 taxmann.com 290 (SC) b .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tion 153 C with effect from 1st June 2015, the legal requirement was that in order to justify the assumption of jurisdiction against the 'other person' under Section 153 C the seized document had to be shown to 'belong' to the other person. It was not enough to show that it pertained to the other person. He relied on the decision in Pepsico India Holdings (P) Ltd. v. ACIT [2014] 370 ITR 295 (Del). He pointed out that the decisions relied upon by the Revenue had been discussed and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lating to each such AY. He submitted that the observations in the said decision to that effect were not obiter dicta but actually arose for consideration. Nevertheless even the obiter dicta of the Supreme Court was binding on the High Court. He submitted that even on merits the CIT (A) had returned a finding of fact on the basis of the documents produced by the Assessees, that the additions made by the AO were not sustainable in law. Analysis and reasons 27. The recent decision of the Supreme Co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

enge by the Assessee by way of additional grounds. A reference was made by the Revenue to the decision of this Court in SSP Aviation Limited v. Deputy Commissioner of Income Tax [2012] 346 ITR 177 (Del) and that of the Gujarat High Court in Kamleshbhai Dharamshibhai Patel v. Commissioner of Income Tax-III (2013) 263 CTR (Guj) 362 which according to the Revenue held to the contrary. 28.2 The Supreme Court noted that the appeals relating to four of the AYs i.e. 2000-01 to 2003-04 were covered by t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s of Section 153C of the Act, incriminating material which was seized had to pertain to the Assessment Years in question and it is an undisputed fact that the documents which were seized did not establish any corelation, document-wise, with these four Assessment Years. Since this requirement under Section 153C of the Act is essential for assessment under that provision, it becomes a jurisdictional fact. We find this reasoning to be logical and valid, having regard to the provisions of Section 15 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Court has also give its imprimatur to the aforesaid approach of the Tribunal. That apart, learned senior counsel appearing for the Respondent, argued that notice in respect of assessment years 2000-01 and 2001-02 was even time barred. 19. We, thus, find that the ITAT rightly permitted this additional ground to be raised and correctly dealt with the same ground on merits as well. Order of the High Court affirming this view of the Tribunal is, therefore, without any blemish. Before us, it was arg .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the additional ground to be raised before it for the first time. 28.4 The Supreme Court also agreed with the decision of the Gujarat High Court in Kamleshbhai Dharamshibhai Patel (supra) to the extent it held that "it is an essential condition precedent that any money, bullion or jewellery or other valuable articles or thing or books of accounts or documents seized or requisitioned should belong to a person other than the person referred to in Section 153A of the Act." The Supreme Cou .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

preme Court approved the above decision of the Gujarat High Court holding that the seized documents should 'belong' to the other person, the legal position in this regard where the search has taken place prior to 1st June 2015 has been settled by the decision of this Court in Pepsico India Holdings (P) Ltd. v. ACIT (supra). In Commissioner of Income Tax v. Vinita Chaurasia (supra), this Court reiterated the above legal position after discussing the decisions in Principal Commissioner of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

g to the 'other person'. 30. In the present case, the documents seized were the trial balance and balance sheets of the two Assessees for the period 1st April to 13th September 2010 (for ISRPL) and 1st April to 4th September 2010 (for VSIPL). Both sets of documents were seized not from the respective Assessees but from the searched person i.e. Jagat Agro Commodities (P) Ltd. In other words, although the said documents might 'pertain' to the Assessees, they did not belong to them. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

this to be an essential requirement. The decisions of this Court in CIT-7 v. RRJ Securities (2016) 380 ITR 612 (Del) and ARN Infrastructure India Limited v. ACIT [2017] 394 ITR 569 (Del) also hold that in order to justify the assumption of jurisdiction under Section 153 C of the Act the documents seized must be incriminating and must relate to each of the AYs whose assessments are sought to be reopened. Since the satisfaction note forms the basis for initiating the proceedings under Section 153 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

Forum
what is new what is new
  ↓     bird's eye view     ↓  


|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version