TMI Blog2021 (1) TMI 737X X X X Extracts X X X X X X X X Extracts X X X X ..... in our view, the impugned assessment could not have been reopened. In view of these specific facts, the action taken by the AO of reopening of the assessment u/s 147 of assessee is not sustainable and the same is quashed as being void ab-initio as being based on seized documents of other assessee and based on presumptions, assumptions and incorrect interpretation of law. Assessee s appeal for AY 2007-08 - This issue is settled by the co-ordinate bench in case of Westland Developers Pvt. Ltd. [ 2015 (11) TMI 1682 - ITAT DELHI] wherein it was held by the Tribunal that in absence of any cogent, definite material which belonged to the assessee or any evidence demonstrating the payment of interest by the assessee on PDCs, reasons recorded for initiation of proceedings u/s 147 were not in consonance with law having been based on mere suppositions, surmises and extrapolation of material seized. The bench completely discarded the argument of AO and Ld. CIT (A) of common management and the assessee belonging to the same group and held that it cannot be equated with existence of incriminating seized material belonging to the assessee. In this case also, there is no seized document foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 021 - Shri Sudhanshu Srivastava, Judicial Member And Shri Prashant Maharishi, Accountant Member For the Appellant : Sh. Ajay Bhagwani, CA For the Respondent : Sh. Jagdish Singh, Sr. DR ORDER PER SUDHANSHU SRIVASTAVA, JM: ITA 1735/Del/2013 is the appeal filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)- XXXIII, New Delhi {CIT (A)} dated 17.12.2012 for Assessment Year (AY) 2006-07 and ITA 1750/Del/2013 is an appeal filed by the assessee against the order of the Ld. CIT (A)-XXXIII, New Delhi dated 18.12.2012 for the AY 2007-08. Both the appeals were heard together and are being disposed by this common order for the sake of convenience. 2.0 The brief facts of the case are that the assessee is a part of the BPTP group and engaged in the business of land aggregation and consolidation. A search u/s 132 of the Income Tax Act, 1961 (hereinafter called the Act ) was conducted on the BPTP group and some other companies on 15.11.2007. However, admittedly, no search was conducted on assessee. 2.1.0 For AY 2006-07, the return of income declaring income of ₹ 4,03,150/- was filed on 15.11.2006. The return was processed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t order made by Assessing Officer was bad in law and void abinitio on the ground that it ought to have been made u/s 153C of the Income Tax Act, and not, as was done u/s 143(3)/147 of the Income Tax Act. 2. That without prejudice, on the facts and circumstances of the case and in law, the CIT (A) erred in upholding the assumption of jurisdiction u/s 147 by the Assessing Officer and in making the assessment in pursuance thereof, without dealing with appellant's objections on merits. 2.1 That the CIT (A) having given a finding that no seized material obtained from the search of BPTP Group of cases (no search having been made on the appellant ) belonged to the appellant, clearly erred in yet upholding the action u/s 147 taken in the hands of the appellant based on such seized material. 3. That on the facts and circumstances of the case and in law the CIT (A) erred in holding to quote, 'that seized documents definitely proves that interest is paid on PDC' despite i. that the seized record on the basis of which above finding was given, even according to his own finding by the CIT(A), did not belong to the appellant and, ii. that no enquiries were mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C interest was later reduced in an order passed u/s 154 of the Act to ₹ 21,78,045/-. 2.2.1 The Assessee filed an appeal before the Ld. CIT (A) in which part relief of ₹ 19,39,484/- was allowed in respect of addition on account of PDC interest against the total addition made of ₹ 21,78,045/- and addition of ₹ 2,38,561/- was confirmed. The Ld. CIT (A) also gave relief in respect of disallowance made on account of Additional payment made of ₹ 27,000/- while the disallowance made u/s 40A(3) of the Act of ₹ 12,31,160/- in respect of additional cash payment for the purchase of land was confirmed. 2.2.2 Both the assessee as well as the revenue approached this Tribunal against the order of the Ld. CIT (A). 2.2.3 The appeal by the Revenue was against the relief allowed of ₹ 19,39,484/- in respect of addition on account of PDC interest and disallowance of additional payment made of ₹ 27,000/-. The appeal of Revenue was dismissed due to low tax effect in ITA no.1407/ Del/2013 vide order dated 25.07.2016. ITA No.1750/Del/2013: 1. That on the facts and circumstances of the case and in law the CIT (A) erred in rejecting appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n merits the disallowance was not justified. 6. That the orders passed by the Assessing Officer and Commissioner of Income Tax (Appeals)-XXXIII, New Delhi are bad in law and void ab-initio. 7. The appellant craves permission to add, amend, alter or vary all or any grounds of appeal on or before the date of hearing of the appeal. 3.0 The Ld. Authorised Representative (AR) submitted that first the issues involved in AY 2006-07 will be addressed by him. He filed detailed synopsis during the course of hearing. The Ld. AR at the outset stated that issue of initiation of reopening of assessment proceedings is covered in favour of assessee in one of the group companies viz. Westland Developers Pvt. Ltd. in ITA no. 1757/Del/2013 vide order dated 23.11.2015 wherein identical reasons were recorded by same AO on the same date. A Copy of the said order of Delhi Bench H , New Delhi was filed in the paper book. The Ld. AR argued that identical reasons were recorded by the same AO in case of Westland Developers Pvt. Ltd. on same date i.e. on 29.03.2010. The reasons recorded in Westland Developers Pvt. Ltd. are reproduced as under: REASONS IN CASE OF WESTLAND DEVELOPER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd purchased were paid at the time of execution of the sale-deed and the payment of balance sale consideration was invariably made through post datedcheques (PDCs) and for the intervening period i.e. period between the date of sale-deed and the date of encashment of PDCs interest was paid in cash to the vendors of the land by the vendee company on monthly basis @ 1.25% p.m on the amount of PDCs. During the course of post search enquiries, it was also noticed that the said payment of interest by the vendee company in cash has not been accounted for by it in its books of account. The assessee company has also purchased a large chunk of land and followed the same modus operandi of making payment through PDCs and has made payment of interest of ₹ 24,78,080/- in cash out of books of account. The income of the assessee to the tune of ₹ 24,78,080/- on account of interest paid in cash out of the books of account has, thus, escaped assessment. 2. During the course of search on BPTP and its Group companies a document was found and seized (Pages 1 to 11 of Annexure-A-1 of Party BO-I) from the premises 5th 6th Floor, DCM Building, Barakharnba Road, New Delhi which revealed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt company 3.4 The Ld. AR stated that the Ld. CIT (A) has analysed each and every seized document mentioned in Annexure-A /assessment order and his finding in Para 4.3 and Para 4.4 was given by him after complete verification of all seized documents. 3.5 It was further submitted by the Ld. AR that the fact of the matter is that none of these seized documents which were referred to, relied upon and used in the Reasons recorded for initiation of reopening of assessment belonged to the assessee company. This further gets proved from the fact that the assessment was completed u/s 147 and not u/s 153C of the Act as in the case of seized documents found during the course of search which belong to the other assessee , assessment has to be mandatorily made u/s 153C of Income Tax Act. It was submitted that it clearly shows and proves that none of the seized documents belonged to assessee. 3.6 The Ld. AR submitted that seized documents of other assessee cannot be used or relied upon to make additions in the hands of any other assessee other than the assessee to whom the seized document belong. It was submitted that this issue was decided by the co-ordinate bench in case of on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has escaped. However, in the assessment order, the AO has made addition of ₹ 27,11,182/-. It was submitted that the AO has not brought any material or document or evidence on record to show as to how the amount of ₹ 24,78,080/- was mentioned by the AO in the reasons recorded as against the addition made for ₹ 27,11,182/- in the assessment order. This clearly shows that the reasons were recorded simply by making presumptions and on suspicion and by just putting arbitrary figures in the reasons recorded. 3.10 In respect of second Para of reasons recorded where the AO has used seized documents page 1-11 of Annexure A-a, Party BO-I seized during the course of search on BPTP and its group companies, the Ld. AR argued that these seized documents contain details of payment made towards sale consideration of land, stamp duty and details of additional payments made by various companies which is duly recorded in the books of these companies. In respect of the reason recorded by the AO that post search investigations/enquiries were made to verify the genuineness of additional payments made, the Ld. AR argued that as no search was carried out on the assessee, questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. Sr. Departmental Representative (DR) supported the orders of the AO and the Ld. CIT (A). It was argued that lot of seized documents were found during the course of search which indicated payment of interest in cash outside the books of account in respect of purchase of land where part of sale consideration was paid through post- dated cheques and the assesse being part of BPTP group might also have adopted the same modus operandi as in other group companies. 5.0 With respect to the assessee s appeal for AY 2007- 08, the Ld. AR, at the outset, submitted that Ground nos.1, 4, 6 and 7 were not being pressed. Accordingly, these Grounds are dismissed as not pressed. 5.1 The Ld. AR submitted that Ground nos. 2 and 3 are in respect of use of seized documents found during the course of search on BPTP and some of its group companies which do not belong to assesse and challenge the addition confirmed of ₹ 2,38,563/- on account of so called interest paid on post-dated cheques in cash outside the books of account. It was submitted that during the course of search on BPTP Ltd. and some of its group companies on 15.11.2007, certain documents were found and seized. However, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain seized material belongs to the appellant company . 5.5 It was submitted by the Ld. AR that the fact of the matter is that none of these seized documents which were referred to, relied upon and used in the assessment order for making addition belong to assessee. It further gets proved from the fact that the assessment was completed u/s 143(3) and not u/s 153C of the Act because in case of seized documents found during the course of search which belong to the other assessee , assessment has to be mandatorily made u/s 153C of Income Tax Act. This clearly shows and proves that none of the seized documents belonged to the assessee. 5.6 The Ld. AR submitted that seized documents of other assessee cannot be used or relied upon to make additions in the hands of any other assessee other than the assessee to whom these seized documents belonged to. The Ld. AR relied on the decision of the co-ordinate bench in the case of one of the group companies of BPTP viz. M/s Westland Developers Pvt. Ltd in ITA No.1757/Del/2013 for the AY 2006-07 dated 23.11.2015. It was submitted by the Ld. AR that in the aforesaid case, the AO took action u/s 147 on the basis of material seized u/s 132 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Common Cause vs. Union of India (2017) 77 taxann.com245 (SC) e) Hon ble Delhi High Court in CIT vs. Ved Prakash Choudhary in 305 ITR 245 (Delhi) (2008) f) Hon ble Delhi High Court in CIT vs. Dinesh Jain in 25 taxmann.com 550 (Delhi) 5.11 The Ld. AR argued that the Ld. CIT (A), while sustaining the addition beyond the period of six months from the date of sale deed, has stated in Para 6.4 of his order that his decision of sustaining the addition is formed on the basis of the statement of one Shri Chottu Ram during post search enquiries wherein he has stated that normally PDCs are given for a period of 8-10 months. The Ld. AR argued that first of all, statement of Shri Chottu Ram was not given to the assessee during the course of assessment proceeding and no opportunity to rebut his statement was provided to the assessee. It was submitted that no opportunity of cross examination of Shri Chottu Ram was allowed to the assessee. Further, as there was no search was carried out in the case of the assessee, question of post search enquiries in the case of the assessee does not arise at all. The Ld. AR further argued that there was no purchase of land by the assessee from Shri Chot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through post-dated cheques and addition has been correctly made by the AO. 7.0 Having heard both the parties and after having gone through the paper books filed by the assessee, we now take up the appeals one by one for adjudication. 7.1 As far as the appeal for AY 2006-07 is concerned, we have perused the reasons recorded in case of assessee as well as reasons recorded in the case of West Land Developers Pvt. Ltd. The reasons recorded in case of assessee are identical to the reasons recorded in the case of West Land Developers Pvt. Ltd. on the issue of the alleged interest paid on post dated cheques. We have gone through the seized documents and the summary of these seized documents. It is the assessee s contention that there are no seized documents which are referred to and relied upon in the reasons recorded as well as in the assessment order and which belong to assessee. The Ld. Sr. DR has also failed to bring anything on record to establish that any seized documents found during the course of search belonged to assessee. There is a clear finding by the Ld. CIT (A) in his order at Para 4.3.and Para 4.4 that none of the seized documents belong to the assessee which the Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being no definite material belonging to the assessee, in our opinion, the reasons recorded for initiation of proceedings u/s. 147 against the assessee, are not in consonance with law, having been based on mere suppositions and surmises and extrapolation of material seized. The fact that the assessee is a group company of BPTP Ltd. and overall management is controlled by one person cannot be equated with the existence of incriminating material belonging to the assessee for drawing the adverse inference. We, therefore, find considerable force in the contention of the assessee that assessment is based on alien material having no specific nexus with the assessee and that there is no corroborating and independent evidence to justify that the assessee had paid interest of PDCs, as alleged by the authorities below. The action taken u/s. 147 by the AO is, therefore, void ab initio and not sustainable, having been resorted to on vague reasons. 8. Once, as observed above, we have held the proceedings u/s. 147 as void, we need not to enter into the merits of additions challenged by assessee by way of other grounds and also by the Revenue in its appeal. Accordingly, the appeal of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as being void abinitio, the grounds raised by the assessee on the merits of the additions become academic in nature and are not being adjudicated upon. 8.0 In the result, ITA 1735/Del/2013 filed by the assessee is allowed. 9.0 Coming to assessee s appeal for AY 2007-08, it is seen that in the assessment order, lots of seized documents are mentioned while making the addition in respect of interest paid on post dated cheques. However, nowhere has the AO stated that these seized documents belonged to the assessee. The Ld. CIT (A) has analysed all these seized documents and has given a categorical finding that none of the seized documents mentioned in assessment order belong to the assessee. It is clear from this that the AO has used documents which belonged to other assessees for making the addition in the hands of assessee. Further, the AO has neither called any of the vendors of land nor recorded any statement to arrive at the correct facts. Under such circumstances, question arises as to whether additions can be made in absence of any document/s or any adverse statement/s simply on the basis of suspicion and assumption that the assessee might have also paid interest on post ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the alleged payment of interest by the assessee is covered by the judgment of the Hon ble Jurisdictional (Delhi) High Court in case of CIT vs. Lubtec India Ltd. reported in 311 ITR 175 ( Delhi) (2009) wherein it was held by the Hon ble Delhi High Court that where there was nothing to show that expenditure in question was in fact incurred by assessee and assesese had denied having incurred expenditure and had contended that it did not have that kind of money, no addition on account of such expenditure could be made to assessee s income. The issue of alleged payment of interest by the assessee is also covered by the decision of Hon ble Delhi High Court in the case of CIT vs. Ved Prakash Choudhary reported in 169 taxman 130 (Delhi) ( 2008) wherein the addition was deleted as there was no corroborative evidence to show that there was in fact transfer of money. Accordingly, considering the facts of the case and judicial pronouncements as discussed above, the Ground nos. 2 3 relating to addition confirmed by the Ld. CIT (A) in respect of interest paid on post-dated cheques outside the books is deleted. 9.1 Ground of Appeal no. 5 is related to disallowance u/s 40A(3) of Income T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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