TMI Blog2018 (10) TMI 578X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment proceeding under section 153C of the Act in assessment year in question, is without jurisdiction and beyond the purview of the said provision. Accordingly, we quash the assessment proceeding under section 153C of the Act in the instant assessment year Effective receipt of any amount from FIIT-JEE group - Held that:- Learned counsel has failed to explain as how the funds have been utilised for charitable purpose. In the instant case by way of collusion between the FIIT-JEE group and the assessee, the funds have been given the group entities in the name of disbursement of scholarship etc. This collusion is evident from the statement of Sh. Aseem Gupta as how the cheque books of the assessee-society were controlled by the authorities of the FIIT-JEE group. By way of providing scholarship to the meritorious students, the FIITJEE group has served its business purposes of attracting the students to various courses run by them. Thus in our opinion, the funds of the assessee-society have not been utilised for the charitable purposes. We, accordingly, uphold the finding of the lower authorities in denying the exemption under sections 11 and 12 of the Act. - Decided in fav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riteria stipulated under section 153C of the Act ; 4. That notice issued under section 153C, order passed under section 153C and subsequent order passed by the learned Commissioner of Income-tax (Appeals) are all bad in law for want of juris diction and requires to be quashed. On the merits 5. That without appreciating the mandatory jurisdictional requirement of the presence of incriminating material, addition is made by the learned Assessing Officer in the assessment order which is mechanically confirmed by the Commissioner of Income-tax (Appeals) without adverting to inundated binding jurisprudence available on the subject, which addition without having any linkage with search based incriminating material, requires to be deleted in limine. 6. That the learned Commissioner of Income-tax (Appeals) made manifest error of law and facts in sustaining the addition made by the learned Assessing Officer in the impugned order which suffers from serious debility and is not in accordance with law and is arbitrary, invalid and unsustainable in the eyes of law. 7. That the appellant craves leave to add/alter any/all grounds of appeal before or at the time of hearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw and facts in sustaining the addition made by the learned Assessing Officer in the impugned order which suffers from serious debility and is not in accordance with law and is arbitrary, invalid and unsustainable in eyes of law. 7. That the appellant craves leave to add/alter any/all grounds of appeal before or at the time of hearing of the appeal 3. Briefly stated the facts of the case are that a search and seizure action under section 132 of the Income-tax Act, 1961 (in short the Act ) was carried out in the case of . . Investigation Wing of the Income-tax Department, New Delhi on December 17, 2012 and simultaneously, a survey under section 133A of the Act was carried out by the Investigation Wing of the Income-tax Department at the premises of the assessee trust/society situated at 2D, MIG flats, Gulabi Bagh, Delhi. In the search action at the premises of the . . . have been seized. The Assessing Officer in the case of . . . . . JEE Ltd. recorded his satisfaction that those relevant documents belonged to the assessee. Consequently, the Assessing Officer initiated proceedings under section 153C of the Act and issued notice under section 153A read with section 153C of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit work of the four concerns of the FIITJEE group and he received ₹ 60,000 as audit fee from these concerns. In view of these facts, the Assessing Officer observed that sanctity of the objective of the society was thoroughly violated for personal benefit by Sri Aseem Gupta as it was done against the consideration in the form of statutory audit of the assessee as given to him. The Assessing Officer also observed that the amount received as donation from the promoters of . . . . . . . . group was not used for char itable activities and thus there was misuse in the application of the income of the society. In the assessment year 2011-12, the Assessing Officer has brought on record complete planning of the donation from the assessee to the . . . . . . . . JEE group, which was made by the . . . . . . . . JEE authorities. The said planning includes draft letters of correspondence between the assessee and FIITJEE as well as the donors. In the assessment order for the assessment year 2011-12, the Assessing Officer has noted that a sum of ₹ 23,59,65,731 was received as donation for charitable purposes and instead of applying the same for charitable activities, the assessee pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded repeated opportunities to come out with the full facts of the case, but the appellant kept on giving evasive replies. 8.6 It is thus seen that many discrepancies and differences were pointed out to the appellant and opportunities were given for it to explain the case, through various order-sheet entries and opportuni ties in the appellate proceedings. However, the appellant has not come out with clean hands even at this stage. Though it was repeatedly claimed by the appellant that the FIITJEE group was controlling the bank account and the unexplained transactions, but the appellant did not give complete evidence against M/s. FIITJEE Ltd. and despite repeated opportunities did not specify the particular individuals of the FIITJEE group who were involved in making the transactions through the bank accounts of the appellant. 8.7 The appellant has claimed various expenses towards claimed charitable activities and towards administrative expenses for the year under consideration. The learned Assessing Officer has made additions to the income after giving proper and repeated opportunities to the appellant. 8.8 The appellant has been unable to justify any of the grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.17 It is thus seen that many discrepancies and differences were pointed out to the appellant and opportunities were given for it to explain the case, through various order-sheet entries and opportunities in the appellate proceedings. However, the appellant has not come out with clean hands even at this stage. Though it was repeatedly claimed by the appellant that the FIITJEE group was controlling the bank account and the unexplained transactions but the appellant did not give complete evidence against M/s. FIITJEE Ltd. and despite repeated opportunities did not specify the particular individuals of the FIITJEE group who were involved in making the transactions through the bank accounts of the appellant. 8.18 It is clear that the case of M/s. FIITJEE Ltd. shall have to be examined to determine their exact role in the transactions through the bank account of the appellant and to bring to tax the undisclosed income therein. It is also seen that M/s. FIITJEE Ltd. and individuals of this group are the ultimate beneficiaries of the transactions through the appellant concern. Hence, such receipts in the financial year 2009-10 (relevant to the assessment year 2010-11), financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. 4.2.1 According to the learned counsel prior to the amendment to section 153C(1) mentioned above, the six assessment years to be assessed under section 153C of the Act are the six assessment years preceding the assessment year in which the satisfaction note for initiating proceeding under section 153C is recorded or books of account or other documents belonging to the assessee have been handed over to the Assessing Officer, as held by the hon'ble Delhi High Court in the case of CIT v. RRJ Secu rities Ltd. [2016] 380 ITR 612 (Delhi). 4.3 On the other hand, the learned Departmental representative submitted that the provisions of the Act have not been appreciated prop erly in the case of RRJ Securities Ltd. (supra). According to her, the hon'ble Delhi High Court relied on the proviso below section 153C(1) for considering the six assessment years for making assessment under section 153C of the Act whereas the said proviso is with reference to the second proviso to sub-section 153A(1) of the Act i.e. for the purpose of abetment of the assessment. 4.3.1 According to her, even prior to introduction of amendment by way of Finance Act, 2017 to section 153C(1) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year falling within six assessment years (and for the relevant assessment year or years) referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return 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 (and for the relevant assessment year or years) : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years (and for the relevant assessment year or years) : Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years (and for the relevant assessment year or years) referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall abate. In the case of section 153A of the Act, the assessments, if pending on the date of the intimation of the search under section 132 of the Act gets abated. But in the case of section 153C proceedings, the Assessing Officer having jurisdiction over the other person, get the information for assessing/reassessing the case only after recording satisfaction by the Assessing Officer of the search person and handing over of the relevant documents, books of account etc. to the Assessing Officer having jurisdiction over such other person, and therefore, the assessments which are pending on the date of the relevant documents received by the Assessing Officer get abet. Before us, the learned Depart mental representative has submitted that this proviso to section 153C is not for deciding the six assessment years for assessment or reassessment for the purpose of section 153C of the Act. 4.4.4 However, we note that, the Legislature has inserted an amendment to section 153C of the Act, specifying the six assessment years to be assessed, by way of Finance Act, 2017 with effect from April 1, 2017. This amendment has been held by the hon'ble Delhi High Court in the case of Sarwar A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings under section 153C of the Act, the assessment/reassessment pending on the date on which the assets/ documents are received by the Assessing Officer would abate. In respect of such assessments which have abated, the Assessing Officer would have the jurisdiction to proceed and make an assessment. However, in respect of concluded assessments, the Assessing Officer would assume jurisdiction to reassess provided that the assets/ documents received by the Assessing Officer represent or indicate any undisclosed income or possibility of any income that may have remained undisclosed in the relevant assessment years . . . 24. As discussed hereinbefore, in terms of proviso to section 153C of the Act, a reference to the date of the search under the second proviso to section 153A of the Act has to be construed as the date of handing over of assets/documents belonging to the assessee (being the person other than the one searched) to the Assessing Officer having jurisdiction to assess the said assessee. Further proceedings, by virtue of section 153C(1) of the Act, would have to be in accord ance with section 153A of the Act and the reference to the date of search would have to be con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 2011-12 7. Now, we take the appeal for the assessment year 2011-12. Ground Nos. 1 to 3 relates to proceedings under section 153C challenged on jurisdictional grounds. In round No. 1, the assessee has raised the issue that the documents seized from the search operation on another person do not give rise to any undisclosed income and none of the additions has been made based on these documents. In ground No. 2, the assessee has raised that the satisfaction under section 153C recorded on March 25, 2014 does not meet the criteria stipulated under section 153C of the Act. 8. Addressing the grounds, the learned counsel submitted that the documents found in the course of the search operation on the premises of the FIITJEE group, have been alleged to be as belonging to the assessee. He submitted that all these documents are available in public domain and came in possession of the FIITJEE group during normal business transactions with the assessee, and thus these documents cannot be said to be belonging to the assessee. He submitted that one of the prime conditions for invoking section 153C of the Act in the case of the other person is that the documents or other assets fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of CIT (Asst.) v. Saldi Chits Private Ltd. in I. T. A. Nos. 6697 to 6699/Delhi/2013 and submitted that cheque book found belonging to the persons are not incriminating in nature. 8.2 On the other hand, the learned Departmental representative referred to the list of document reproduced by the Assessing Officer in the assessment order and referred to the statement of Aseem Kumar Gupta, controller of the assessee-society/trust, recorded on December 24, 2012, in response to summons issued under section 131 of the Act, which is avail able on pages 95 to 105 of the appeal set. According to the learned Depart mental representative copy of bank account opening form whether it is original or photocopy, it always belongs to the assessee as it is neither a document which is required to be given to other person in ordinary course of business transaction nor is ita public document. The learned Depart mental representative referred to the statement of Sh. Aseem Gupta, wherein he admitted that Sh. Rajesh Sharma (Chartered Accountant) and Sh. D. K. Goel, chairman and managing director of FIITJEE Ltd. wanted to use name of the assessee for rotating the certain funds and for which Mr. Gu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee ? (ii)Whether the documents on the basis of which satisfaction under section 150C has been recorded are incriminating in nature in respect of the assessment year involved. (iii)Whether there is a requirement under section 153C of the Act to record as how the documents belong to the assessee. 8.3.1 Regarding the requirement that documents should belong to the person, other than the person searched, section 153C of the Act in existence during the relevant period is reproduced as under : 153C. Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or asset seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. In the converse case if the vendor's premises are searched and a copy of the sale deed is seized, it cannot be said that the said copy 'belongs to' the purchaser just because it refers to him and he (the purchaser) holds the original sale deed. In this light, it is obvious that none of the three sets of documents - copies of preference shares, unsigned leaves of cheque books and the copy of the supply and loan agreement-can be said to 'belong to' the petitioner. 8.3.4 In the instant case, before we examine whether the documents found and seized from the premises of M/s. FIIT JEE and recorded in satisfaction note under section 153C of the Act belongs to the assessee, it is relevant to reproduce the details of the said documents and the explanation of the assessee in respect of those documents. The learned Commissioner of Income-tax (Appeals) in the impugned order has reproduced the submission of the assessee, which we are extracting the relevant part as under : Sl. No. Documents Explanation of the assessee 1. Copy of letter dated 13/09/2010 by the assessee to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opy of letter of request for issuing cheque book or copy of account opening form submitted to the Canara bank Hauz Khas, the only possibility that these documents could belong either to the asses see or to Canara bank. If the original letter addressed to the bank, is duly submitted to the bank, then it belongs to the bank, however, the said original letter till it is not submitted to the bank, it belongs to the assessee. If a copy of the original letter on which acknowledgment is received from the bank, then it would belong to the assessee, as it would be the copy marked for the assessee. In this case, Sh. Aseem Gupta, controller of the assessee-society has admitted that how the above documents travelled to the premises of the FIITJEE Ltd. He was summoned under section 131 of the Act and his statement was recorded on December 24, 2012 in contin uation with the process of search proceedings at the premises of FIITJEE Ltd. and survey proceeding at the premises of the assessee. In response to questions raised regarding opening of bank accounts of the assessee-soci ety in Canara bank (i.e. question No. 9), he stated that his friend Sh. Rajesh Gupta Chartered Accountant introduced him t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tutory audit of their following account : 1. M/s. Tetrahedron Education Academy Society, 5-9-14D, Sahara Manji, Saifabad, Hyderabad-500 004 2. M/s. Srikara Educational Society, H. No. 8-3-167/D/15, 1st Floor, Kalyan Nagar, Hyderabad-500 038. 3. M/s. Emanuel Education Society, H. No. 47-7-47, IV Lane, Dwarkanagar, Opp. Nehru Bazar, Vishakhapatnam. 4. M/s. Vijetha Educational Society, H. No. 232, Shanti Plaza, KPHB Colony, Kulkatpally, Hyderabad. I have received ₹ 60,000 as audit fee for these concerns. Q. 10. Was there any agreement between you as trustee and mem ber of M/s. Sadbhawna and M/s. CMV Education Society respectively and M/s. Fiitjee Ltd. or its promoter members made ? Ans. : An agreement was signed by me as trustee/member of M/s. Sadbhawna and M/s. CMV Education Society with M/s. Fiitjee Ltd. This was prepared by M/s. Fiitjee Ltd. and was sent to me by Sh. Rajesh Sharma for my signature. It was regarding providing scholar ship to needy students. The purpose of the said agreement was not apprehended by me at that time because I was not aware how trans actions were rotated through my trust/society. Q.11 Please state, do you have received any a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the assessee that these documents are not incriminating in nature. 8.4.1 We have observed the statement of Sri Aseem Gupta, a part of which has been already reproduced above. It is evident from the statement that these documents are part of the fund rotating exercise from the asses see to M/s. FIITJEE Ltd. The controller of the society himself has admitted in response to question No. 8 that there was no activities in the trust. He has also admitted the fact that duly signed cheque books of the said Canara Bank account was given by him to the authorities of the FIITJEE Ltd. The authorities of the FIITJEE Ltd. were having complete control over the funds available in the said bank account. Sh. Aseem Kumar Gupta admitted of having ignorance of what kind of activities were carried using the name of the assessee. Sh Aseem Gupta has admitted that for providing the name of the assessee for rotating the funds of M/s FIITJEE, he was given work of statutory audit of few concerns of the FIITJEE group. 8.4.2 Thus, when we see these documents mentioned in the satis faction note in corroboration with the statement of Sri Assem Gupta, we do not have any hesitation in accepting that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above case. 8.5.2 In respect of the above satisfaction note in the case of N. S. Software (Firm) (supra), the Tribunal observed that the Assessing Officer did not indicate how vaguely refer red documents in the satisfaction note were found to be belonging to the assessee within the meaning of section 153C of the Act. The Tribunal further observed that there was no record ing/reference about the contents of these documents allegedly pertaining to the assessee and even in the assessment order, no such mention had been made. 8.5.3 The honourable Tribunal and observed that the learned Assessing Officer has not explained steps taken by him to determine that the seized material belong to the assessee-firm. The hon'ble High Court held that the satisfaction note has been prepared in the standard mechan ical format and it does not provide any details about the books of account which allegedly belong to the assessee-firm. In view of the above obser vation, the hon'ble High Court held that the failure of the Assessing Officer to record a specific satisfaction and how the recovered material belong to the assessee in the note that preceded the notice issued under it, vitiates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the above, in our opinion, the facts of the case of NS software (supra) are distinguishable and thus, the ratio of the said decision of the hon'ble High Court over the facts of the instant case. Accordingly, we reject the content ion of the learned counsel on this issue. 8.5.8 In view of the aforesaid discussions, we are of the opinion that the proceedings under section 153C of the Act have been validly initiated in the case of the assessee. Grounds Nos. 1 to 3 of the appeal challenging the validity of the proceedings under section 153C of the Act are accordingly dismissed. 9. In ground No. 4, the assessee has challenged the addition denying the stand taken by the learned Commissioner of Income-tax (Appeals) that the assessee is not in effective receipt of any amount from FIITJEE group. 9.1 The learned counsel submitted that source of the money in the hands of the assessee is from the promoters of the . . . . . . . . . group and thus addition if any should be made in the hands of the promoters of that group rather than in the hands of the assessee. 9.2 The learned Departmental representative, on the other hand, relied on the order of the lower authorities an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties of the FIITJEE group. By way of providing scholarship to the meritorious students, the FIITJEE group has served its business purposes of attracting the students to various courses run by them. Thus in our opinion, the funds of the assessee-society have not been utilised for the charitable purposes. We, accordingly, uphold the finding of the lower authorities in denying the exemption under sections 11 and 12 of the Act. The ground No. 4 of the appeal is accordingly dismissed. 10. In ground No. 5, the assessee has challenged the jurisdictional requirement of presence of incriminating material. The ground of jurisdictional requirement of presence of incriminating material has already been adjudicated by us in grounds Nos. 1 to 3 of the appeal and, therefore, we are not separately adjudicating the ground No. 5 of the appeal and it is dismissed accordingly. 11. In ground No. 6, the assessee has raised the general issue that the Commissioner of Income-tax (Appeals) has made manifest error of law and facts in sustaining the addition, which is not in accordance with law. No specific arguments in respect of this ground has been raised before us, accordingly this ground is dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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