TMI Blog2018 (1) TMI 1076X X X X Extracts X X X X X X X X Extracts X X X X ..... o initiate proceedings u/s 153C of the Act against the assessee. Reasons assigned by the AO in the satisfaction note were silent about any incriminating information or unaccounted or undisclosed hidden, income, seized by the Revenue from the assessee - Decided in favour of assessee - ITA No. 4822 to 4824/Del/2014 - - - Dated:- 22-1-2018 - Shri Bhavnesh Saini, Judicial Member And Shri L.P. Sahu, Accountant Member For the Appellant : Smt. Shefali Swaroop, CIT DR For the Respondent : Sh.S.K.Tulsian, Adv. And Ms. Bhoomija Verma, Adv. ORDER PER BHAVNESH SAINI, JUDICIAL MEMBER All these appeals by the Revenue are directed against the different orders of Ld. CIT(A)-XII, New Delhi dated 30.06.2014 for the AYs 2007-08, 2008-09 2009-10 on the following identical grounds:- ITA No.4822/Del/2014 (A.Y. 2007-08) 1. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in holding that the additions made without any material found during the course of search are outside the scope of section 153A / 153C of the Act, when section 153A mandates the AO to 'assess or reassess the total income' as against 'ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried out any business activity. Further, it was seen that the assessee has purchased office space at A-1601 B-1601 having total super built up area of 5402 ft. alongwith two terraces administering 1256 ft. appurtenant to the said office, in total amounting to 6658 ft. located on 16th Floor, Statesman House, B-148, Barakhamba Road, New Delhi alongwith 6 car parking spaces in the lower basement from M/s UTI Ltd. on 05.05.2006 i.e. during the FY 2006-07. The Assessing Officer further noted that the assessee has not carried out any business activity during the FY 2003-04 to 2009-10 and this premise was being used by various group concerns of M/s Today Group namely M/s Today Hotels Pvt. Ltd. etc. The Assessing Officer asked the assessee as to why fair rental value not be calculated in respect of its office space in the above property. The assessee explained that only 1/3 of the total space was used by M/s Today Hotels Pvt. Ltd. etc. and rest 2/3 of space remained in possession of the assessee. They have used the premise just for the purpose of the registered office and not other activities have been conducted. The Assessing Officer did not accept contention of the assessee and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocuments seized /requisition belongs to some other persons, then such books of accounts or documents or assets seized shall be handled to the Assessing Officer having jurisdiction over such other person. Thereafter, the Assessing Officer can proceed u/s 153C of the Act. All these conditions have to be satisfied cumulatively before assuming valid jurisdiction to assess or reassess income on such other person in accordance with section 153C. In section 132(1) of the Act, they word seized clearly referred to undisclosed assets of the person searched and not assets which are duly declared or disclosed by such persons. The assessee relied upon the decision of the Delhi High Court in the case of L.R.Gupta vs Union of India 194 ITR 32 in which it was held that it is not every article, which is found as a result of search, which has to be seized. The seized books of accounts or other valuable articles or things referred to in section 153C of the Act, would mean any document/ article which is hidden from the Income Tax Department and represents wholly or partly any undisclosed income of any person. The satisfaction note and the documents referred therein is the agreement for sale da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minating documents are void. In that case, the Tribunal categorically observed that in order to initiate proceedings u/s 153C of the Act, documents seized must be incriminating in nature. It was submitted that the AO has merely computed the annual letting value of the property without reference to any incriminating material in the assessment order u/s 153C of the Act. Thus, no incriminating material was found during the course of search to initiate proceedings u/s 153C of the Act. 4. Ld.CIT(A) considering the submissions of the assessee and material on record, observed that where the assessment or reassessment proceedings are pending completion when the search is initiated or requisition is made, they will abate making way for AO to determine the total income of the assessee in which the undisclosed income would also be included. However, in cases where assessment or re-assessment proceedings have already been completed and assessment orders have been passed determining the assessee s total income and such orders are substituting at that time when search or requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the Revenue Department and duly disclosed in the books of accounts could not be treated as incriminating material found during the course of search. He has submitted that no incriminating material have been referred to in the satisfaction note. The AO did not make any addition in AY 2007-08 as regards the sale consideration mentioned in the satisfaction note. The AO merely calculated the AKV of the property in question without bringing any material on record that the assessee has let out the entire property in question to M/s Today Hotels Pvt. Ltd. and others. He has submitted that the issue is covered in favour of the assessee by the judgement of the Hon ble Supreme Court in the case of CIT vs Sinhgad Technical Education Society (supra). The issue is same in remaining appeals. 7. Ld. DR has not been able to point out any infirmity in the order of the Ld.CIT(A) in allowing appeal of the assessee. Ld. DR has also not pointed out as to why the issue is not covered by the judgement of Hon ble Supreme Court in the case of Sinhgad Technical Education Society (supra). 8. After considering the facts and circumstances of the case, in the light of the material on record, we do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal ground on the ground that it was a jurisdictional issue taken up on the basis of facts already on record, that under section 153C of the Act, incriminating material which was seized had to pertain to the assessment years in question, and that the documents which were seized did not establish any co-relation, document-wise, with these four assessment years. The Tribunal found that the material disclosed in the satisfaction note belonged to assessment year 2004-05 or thereafter. The Tribunal rightly permitted this additional ground to be raised and correctly dealt with the ground on the merits as well. The High Court was right in affirming this view of the Tribunal. Decision of the Bombay High Court in CIT v. Sinhgad Technical Education Society [2015] 378 ITR 84 (Bom) affirmed. (ii) That the assessment order passed by the Assessing Officer covered eight assessment years. For six assessment years the assessment was under section 153C of the Act. The assessment order was set aside only in respect of four of those assessment years and on a technical ground. The objection pertaining to the four assessment years in question did not relate to the other tax assessment years, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocuments were in the handwriting of the petitioner. In the circumstances, when the condition precedent for issuance of notice was not fulfilled action taken under section 153C of the Act stood vitiated. 11. Hon ble Bombay High Court in the case of CIT vs Lavanya Land Pvt. Ltd. [2017] 397 ITR 246 (Bom.) held as under:- It is clear that before issuing notice under section 153C of the Income-tax. Act, 1961, the primary condition that has to be fulfilled is that the money, bullion, documents, etc., seized should belong to such other person. If this condition is not satisfied, no proceedings could be taken under section 153C. The JC group was a partner in the Mumbai Special Economic Zone and Navi Mumbai Special Economic Zone projects of India. This group had floated various companies to purchase large chunks of land in the vicinity of the special economic zones. The group's real estate operations were being handled by V, G and D. D was also the managing land transactions outside the Mumbai Special Economic Zone. The assessee was one of the companies floated by this group to purchase land outside the Mumbai Special Economic Zone. During search of D's residence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. Hon ble Madras High Court in the case of CIT vs Late J. Chandrasekar (HUF) [2011] 338 ITR 61 (Mad.) held as under:- On the search conducted in the case of A and group on November 25, 2003, material pertaining to on-money payment paid to the assessee in respect of property purchased from the assessee were seized. Based on that, the Assessing Officer issued notice under section 153C of the Income-tax Act, 1961, and reworked the capital gains. The Commissioner (Appeals) and the Tribunal held that the notice under section 153C was not valid. On appeal to the High Court: Held, dismissing the appeals, that the Assessing Officer did not have the benefit of the seized material while issuing the notice under section 153C. In the light of the fact that the Revenue did not produce any material to show that the materials were available at the hands of the Assessing Officer at the time of issuing notice, the Tribunal rightly came to the conclusion that he assumption of jurisdiction under section 153C was not valid. 13. The ITAT, Agra Bench in the case of ACIT, Circle-1, Gwalior vs Global Estate [2013] 142 ITD 740 (Agra) held as under:- The assessee had a case f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions, it is clear that in terms of section 153C of the Act, the AO should be satisfied that any money, bullion, jewellery or other valuable articles or things or books of accounts or documents seized or requisition belong or belongs to a person other than the person referred to in section 153A of the Act and he shall hand over the seized documents to the AO having jurisdiction over that person. Therefore, the satisfaction of the AO before initiating proceedings u/s 153C is must that the seized documents which are incriminating in nature belong or belongs to the assessee so as to proceed u/s 153C of the Act. The copy of the satisfaction note recorded by the AO u/s 153C is filed at page 71 of the Paper Book. In this satisfaction note, the AO has referred to the seized annexures/documents which is agreement for sale dated 05.05.2006 for ₹ 5,01,51,000/- between UTI and the assessee company for purchase of office space in property located at 16th Floor, Statesman House, Barakhamba Road, New Delhi. The AO on the basis of this seized documents satisfied himself that there is an escapement of income, however, the property in question have already been disclosed by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, covered in favour of the assessee by the judgement of Hon ble Supreme Court in the case of Sinhgad Technical Education Society (supra) because there is no incriminating material found during the course of search so as to make the above addition in the assessment order. 16. It may also be noted here that the departmental appeal in ITA No.4825/Del/2014 (AY 2010-11) was also heard separately in which the only issue was involved of the ALV determined by the AO which was restricted to Ld.CIT(A) to 1/3rd of the office space leased out to M/s Today Hotels Pvt. Ltd. etc. as claimed by the assessee. The findings of the Ld.CIT(A) were based on the facts that in subsequent assessment year, the AO in the orders u/s 143(3) have accepted the claim of the assessee on the basis of the matter remanded by the Tribunal. This appeal is separately decided vide order dated 17.01.2018 and findings in this appeal are reproduced as under:- 8. Considering the facts of the case in the light of the order of the Tribunal and the assessment order for AY 2011-12 2013- 14, it is clear that the claim of the assessee has been accepted by the AO in set aside proceedings for AY 2011-12 that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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