TMI Blog2018 (2) TMI 434X X X X Extracts X X X X X X X X Extracts X X X X ..... eserve to fail. See CIT Versus RRJ Securities Ltd. And Vica-Versa [2015 (11) TMI 19 - DELHI HIGH COURT] Also remit the issue of additions on merits back to the file of the Assessing Officer to decide the same afresh in the light of directions/observations given by ITAT, Bench ‘B’ in the case of DCIT vs. M/s. Devi Dayal Petro Chemicals Pvt. Ltd [2014 (10) TMI 216 - ITAT DELHI] wherein held AO will first verify the years to which the seized documents belonged - There would be no justification for continuation of the proceedings under Section 153C to which the seized documents do not belong. If the transactions are duly accounted for in the books of account, as contended by the learned counsel, the AO will drop the proceedings initiated u/s 153C - ITA Nos. 6410 to 6415/Del./2013, C.O. Nos. 184 to 189/Del./2014 And ITA Nos. 6410 to 6415/Del./2013 - - - Dated:- 29-1-2018 - Shri H.S. Sidhu, Judicial Member And Shri L.P. Sahu, Accountant Member For The Revenue : Shri S.S. Rana, CIT/DR For The Assessee : Shri Kapil Goel, Advocate ORDER Per L.P. Sahu, A.M.: All the above appeals by the Revenue and cross-objections by the assessee arise out of separate ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital and building up huge reserves and surplus over the years and these reserve surpluses are declared invested in stocks of textiles. The Assessing Officer further observed that as and when cash is required, the stocks are shown to have been sold and the moneys are utilized for other purposes as per requirement. 4. Analysing the facts of the present case on the anvil of aforesaid facts, the Assessing Officer observed that the assessee had declared a closing stock of ₹ 17,22,87,423/- as on 31.03.2002 forming part of opening stock of the assessment year under consideration, purchase of textile goods of ₹ 32,91,900/- and sales thereof at ₹ 35,92,084/-. On being asked, the assessee submitted that the entire purchases of textile goods were made in cash and were not exigible to Sales Tax and therefore, there was no need to file and Sales Tax Record/returns. 5. The Assessing Officer further observed that during the post search enquiries conducted by Investigation Wing at the address of the assessee company, i.e., B-340, Hari Nagar, New Delhi, it was found that about 15 nos. of concerns of Thapar Group were declared as operating from this address. The names of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ales are only out of current year transactions which are held unverifiable and bogus. It is highly improbable that with a huge stock inventory of goods which change in fashion and taste the assessee has to make sales from fresh purchases only. The preponderance of probability suggests that the stocks are not genuine but since these are declared prior to 1.4.02, no action is being taken for now. 9. Keeping in view the facts of the case and reply of the assessee, it is crystal clear that all cash purchases are unverifiable and hence a sum of ₹ 32,91,900/- is disallowed. (The opening stock is of the period before the block period of section 153C). Penalty proceedings u/s 271(c) are being initiated for furnishing inaccurate particulars of income. Since, the entire cash purchases of ₹ 32,91,900/- are bogus and are brought to tax as unaccounted expenditure u/s 69C of the IT Act, no further addition is made u/s 40A(3) of the IT Act since the entire amount of cash purchases is brought to tax. 10. Similarly, the expenses claimed by the assessee company in P L a/c are also unverifiable as such 100% of the expenses are disallowed. Penalty proceedings u/s 271( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o appreciate that the assessment framed by the AO is against the statutory provisions of the Act and without complying the procedures prescribed u/s. 153C of the Income Tax Act and as such the assessment being bad in law deserves to be quashed. 4. That on the facts and circumstances of the case and the provisions of law, the CIT (A) has failed to appreciate that the AO was not justified to ignore the submission that assessment u/s. 153C of the Income Tax Act be restricted to assessment in respect of seized documents of incriminating nature for the year under consideration and in absence of any incriminating seized document, assessment framed u/s. 153C of the Income Tax Act for the year under consideration, is bad in law and deserve to be quashed. 5. That in view of the facts and circumstances of the case, the CIT (A) has erred in holding the conclusion that the 'audited books' notwithstanding, the book results are required to be rejected, since the narrations are artificial, sham and not reflective of the actual business / commercial transactions. 6. That in view of the facts and circumstances of the case, CIT (A) has erred in disregarding the purchases, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer of the assessee, the person other than the person searched. It is also submitted that various applications seeking information on the satisfaction note under RTI Act were given by the assessee, but no replies thereof were received by the assessee. He submitted that the satisfaction note by the A.O. of searched person is a condition precedent for initiating proceedings u/s 153C of the Act against the person other than the searched person. In the instant case, since the statutory satisfaction has not been so recorded, the Assessing Officer of the Assessee is not entitled to acquire jurisdiction for initiating proceedings u/s. 153C as per law. It was also submitted that in the following cases of assessee group, the same satisfaction note, as recorded in the instant case, has been treated by the ITAT, Delhi Benches, to have been recorded in the case of assessee and not in the case of person searched and the Assessing Officer has been held to have no jurisdiction to initiate proceedings u/s 153C of the Act : (i). DCIT vs. Satkar Motors (ITA Nos. 6398 to 6403/Del/2013) and CO Nos.359 to364/Del./14) Order dated 29.10.2015. (ii) Tanvir Collections, 168 TTJ 145 (ITAT H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded in the case of person searched and valid for acquiring jurisdiction u/s. 153C of the Act. The observations of the Hon ble jurisdictional High Court read as under : 15. In the present case, the ITAT overlooked the fact that the Satisfaction Note was in fact recorded by the AO of the searched person who also happened to be the AO for the Assessee (the other person) as well. This is clear from the sentence in the Satisfaction Note which reads: The undersigned is the jurisdictional AO of these cases. The AO of the searched person has recorded the satisfaction that the seized documents belonged to the Assessee. In similar circumstances in Satkar Fincap Ltd. (supra), this Court held likewise. The Satisfaction Note in the present case, therefore, satisfies the requirement of the law. Consequently, the question framed is answered in the negative i.e., in favour of the Revenue and against the Assessee. In view of above interpretation of Hon ble jurisdictional High Court on the impugned text of satisfaction note, we have no reason to accept the contention of the assessee that the said satisfaction note was recorded in the case of assessee and not in the case of person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than the one searched) to the AO having jurisdiction to assess the said Assessee. Further proceedings, by virtue of Section 153C(1) of the Act, would have to be in accordance with Section 153A of the Act and the reference to the date of search would have to be construed as the reference to the date of recording of satisfaction. It would follow that the six assessment years for which assessments/reassessments could be made under Section 153C of the Act would also have to be construed with reference to the date of handing over of assets/documents to the AO of the Assessee. In this case, it would be the date of the recording of satisfaction under Section 153C of the Act, i.e., 8th September, 2010. In this view, the assessments made in respect of assessment year 2003-04 and 2004-05 would be beyond the period of six assessment years as reckoned with reference to the date of recording of satisfaction by the AO of the searched person. It is contended by the Revenue that the relevant six assessment years would be the assessment years prior to the assessment year relevant to the previous year in which the search was conducted. If this interpretation as canvassed by the Revenue is accepted, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that on the identical contentions of the parties and similar facts and circumstances of the case, the ITAT, Delhi Benches on the basis of same search dated 20.10.2008, has decided the merits of same additions made on the basis of similar documents found, in the case of assessee s group, DCIT vs. M/s. Devi Dayal Petrochemicals Pvt. Ltd. (Revenue s appeal Nos. 5430 to 5436/Del./2013) and assessee s cross objections Nos. 83 to 88/Del./2014) for A.Yrs. 2003-04 to 2008-09, have restored the issue back to the file of Assessing Officer vide order dated 10.09.2014 observing as under : Ld. Counsel of the assessee further stated that assessment framed is against the scheme of the Act whereby the reassessment u/s. 153C in such cases is to be confined to the additions and disallowances consequent to the material found during the course of the search. The additions which are not based on any incriminating material found during search are liable to be deleted. He also submitted that the revenue authorities have erred in law and on facts in holding that the audited books and transactions through bank nowithstanding, the book results are required to be rejected, since the entries are artifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Satisfaction Note for issuing notice u/s. 153C of the I.T. Act, 1961 in the case of M/s Devi Dayal Petro Chemicals Pvt. Ltd., Lane W-17-A, House No. 18, Western Avenue, Sainik Farm South, New Delhi, AACCD454J for A.Y. 2003-04 to 2008-09. 05/7/2010 Documents at pages 1 to 25 of Annexure A-25 seized by the Party R-2 from the premises at F-6/5, Vasant Vihar, New Delhi during the course of search conducted u/s. 132 of the I.T. Act, 1961 on 20.10.2008 in the case of Sh. BK Dhingra, Smt. Poonam Dhingra, M/s Madhusudan Buildcon Pvt. Ltd. have been found to belong to M/s Devi Dayal Petro Chemicals Pvt. Ltd., Lane W-17-A, House NO. 18, Western Avenue, Sainik Farm South, New Delhi which has not been covered u/s. 132 of the I.T. Act, 1961. Accordingly, in terms of provisions of section 143C of the Act, notices u/s. 153C are hereby issued for the A.Y. 2003-04 to 2008-09 in the case of M/s Devi Dayal Petro Chemicals Pvt. Ltd.. The case was centralized in the Central Circle-17, New Delhi vide orders dated 14.12.2009 of CIT-IV, New Delhi. SD/- Dated 5.7.10 DCIT, Central Circle-17, New 9.1 It was contended by the learned counsel that the documents mentioned by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 Considering the facts of the case and the arguments of both the sides, we set aside the matter to the file of the Assessing Officer for re-examination of the issue in the light of the above decision of Hon'ble Jurisdictional High Court i.e., the Assessing Officer will first verify the years to which the seized documents belonged. There would be no justification for continuation of the proceedings under Section 153C to which the seized documents do not belong. Therefore, the Assessing Officer will drop the proceedings initiated under Section 153 of the years to which the seized documents do not belong. For the year to which the seized documents belonged, he will verify whether the transaction reflected by the seized documents are duly accounted for in the books of account. If the transactions are duly accounted for in the books of account, as contended by the learned counsel, the Assessing Officer will drop the proceedings initiated under Section 153C. However, if for the year to which the seized documents belonged, the transaction reflected by the seized documents is not recorded in the books of account, the proceedings under Section 153C will continue and the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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