TMI Blog2019 (6) TMI 1591X X X X Extracts X X X X X X X X Extracts X X X X ..... on hand. As a matter of fact, the ongoing assessment proceedings under section 143(3) of the Act would abate on receipt of these seized materials as per the second proviso to section 153C of the Act. We are of the view that in the event the AO wanted to take cognizance of the seized materials, he ought to have invoked the provisions section 153C of the Act after recording his satisfaction based on material sent by the AO of Shri. Manoj Kumar Jain. As pre-condition laid down by the Legislature of recording of satisfaction for taking action under section 153C of the Act cannot be side-stepped / brushed aside and additions be made in proceedings pending under section 143(3) of the Act as the scope of assessments framed under sections 143(3) and 153C of the Act are quite different. In that view of the matter, we hold that the protective additions made by the AO in the impugned order of assessment for Assessment Year 2008-09 dated 31.12.2009, are contrary to the provisions of the Act and are therefore to be deleted. Similarly, the addition sustained by the CIT(A) of ₹ 6,45,000/- on substantive basis as profit from trading in iron-ore based on the material found and seized in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... members, associates and other business concerns. 3. A short while after the search action on 26.10.2017 carried out in the case of the assessee; the Department conducted a survey under section 133A of the Act on 25.03.2008 during which certain documents were impounded. Subsequently, a search under section 132 of the Act was conducted on 01.04.2008 in the case of one Shri. Manoj Kumar Jain at Hospet, in the course of which certain documents and materials were found and seized from his premises. Several statements under section 132(4) / 131 of the Act were recorded by the Department from Shri. Manoj Kumar Jain; with reference to materials found and seized from his premises; in respect of which he stated that some of the transactions related to unaccounted purchase and sale of iron of the assessee in the case on hand. He also submitted that there were certain payments made by him out of cash kept by Shri. Anil H. Lad and his group; which were not recorded in the books of account. Shri. Manoj Kumar Jain, subsequently retracted the admissions made in the aforesaid statements at the time of search and admitted that all the transactions as per the seized material related to him and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000/- b) Protective addition - ₹ 13,41,36,761/- 3.2 Aggrieved by the order of assessment dated 31.12.2009 for Assessment Year 2008-09, the assessee preferred an appeal before CIT(A) challenging the additions / disallowances made. The CIT(A)-Mysore, disposed off the assessee s appeal vide order dated 17.10.2013 allowing the assessee partial relief. In the impugned order, the CIT(A) deleted the substantive addition of ₹ 28,00,00,000/- and the protective addition of ₹ 13,41,36,761/- in respect of the alleged unaccounted transactions with Shri. Manoj Kumar Jain. The CIT(A) placed reliance on and followed the decision of CIT(A)-VI, Bangalore, in the case of Shri. Manoj Kumar Jain, wherein it was held that the total turnover in unaccounted trading of iron ore carried out by Shri. Manoj Kumar Jain on behalf of Shri Anil H. Lad was ₹ 29,25,88,980/-. 4.0 Both Revenue and the assessee, being aggrieved by the order of CIT(A)- Mysore, dated 17.10.2013, have preferred cross appeals before the Tribunal. The grounds raised by Revenue and the assessee are extracted hereunder:- Revenue s Appeal for Assessment Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. The addition of ₹ 6,45,000/- sustained by the learned CIT [A] on substantive addition in the place of the substantive addition of ₹ 28,00,00,000/- and the protective addition of ₹ 13,41,36,761/ - is bad in law since the said additions have been made on the strength of the documents found and seized during the course of search under section 132 of the Act in the case of Sri. Manoj Kumar Jain especially since the learned assessing officer has not followed the procedure as envisaged under section 153C of the Act and hence, the addition made in the hands of the appellant in regular assessment proceedings deserve to be deleted. 2. For the above and other grounds of cross objection that may be urged at the time of the hearing of the appeal which may be allowed and justice rendered. 4.4 In the course of hearings, the learned AR of the assessee has filed paper book (pages 1 to 415) which, inter alia, contains statements recorded from Shri. Manoj Kumar Jain and other material relied upon; a synopsis of dates and arguments dated 14.02.2019 and cited and placed reliance on various judicial pronouncements in support of the assessee s case. The learned DR for Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al before us are pure questions of law and the facts relevant for appreciating these grounds are also available on record. We also observe that these additional grounds go to the very root of the matter of jurisdiction for making the additions in the assessments framed under section 143(3) of the Act. In this view of the matter, and respectfully following the ratio of the decision of Hon ble Apex Court in the case of NTPC Ltd., (supra), we admit the additional grounds of appeal raised by the assessee (supra); which shall be considered and disposed off first before going into the grounds raised by the assessee and Revenue on merits. 7.4 The assessee, vide the additional grounds raised (supra) contends that the additions made protectively and substantively, on the basis of materials found in the course of search conducted in the case of Shri. Manoj Kumar Jain, without invoking the provisions of section 153C of the Act in the assessment for Assessment Year 2008-09, concluded under section 143(3) of the Act vide order dated 31.12.2009, is illegal. In this regard, the learned AR drew the attention of the Bench to the provisions of Section 153C of the Act, which enable the AO of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntended that the provisions of section 153C of the Act need not be invoked when assessment proceedings under section 143(3) of the Act are pending in the case of the assessee. It was also contended that there was no bar for making assessment by taking cognizance of material found / seized in the case of Shri. Manoj Kumar Jain. 7.6.1 We have carefully considered the legal arguments / contentions put forth by both parties. The facts not in dispute are that the substantive and protective additions were made in the case on hand on the basis of material found and seized from the premises of Shri. Manoj Kumar Jain. It is also amply clear that the AO did not invoke the provisions of Section 153C of the Act on receipt of the material; but rather chose to take cognizance of these materials (i.e., seized in the case of Shri. Manoj Kumar Jain) in the course of pending assessment proceedings under section 143(3) of the Act for Assessment Year 2008-09 that were before him. It is therefore clearly established that the AO has used seized material / documents found in the course of search conducted in the case of a third party (i.e., search of Shri. Manoj Kumar Jain) for making the additions in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person. 7.6.3 From the above, it is seen that the jurisdictional conditions and circumstances prescribed by the legislature for assumption of jurisdiction and taking action under section 153C of the Act is different when compared to a regular assessment. The jurisdiction to make an assessment under section 153C of the Act arises when satisfaction is reached that the materials found in the course of search of some other person have a bearing on the determination of the income of the assessee. Further, in the first proviso to section 153C of the Act, it is provided that the reference to the date of search in the second proviso to section 153A of the Act; dealing with abatement of pending proceedings on the date of search; shall for the purpose of the persons proceeded under section 153C of the Act be construed as the date on which the seized materials are received by the AO. 7.6.4 In the case on hand, we find that there was a search under section 132 of the Act in the case of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is CG/1 to 11 and CG/HD/1 which were seized only from the office premises of Cygnus group of companies in which assessee is a director. In this regard, it would be pertinent to note that as per section 292C of the Act, there is a presumption that the documents , assets, books of accounts etc found at the time of search in the premises of a person is always presumed to be belonging to him / them unless proved otherwise. This goes to prove that the presumption derived is a rebuttable presumption. Then in such a scenario, the person on whom presumption is drawn , has got every right to state that the said documents does not belong to him / them . The Id AO if he is satisfied with such explanation , has got recourse to proceed on such other person (i.e the person to whom the said documents actually belong to) in terms of section 153C of the Act by recording satisfaction to that effect by way of transfer of those materials to the AO assessing the such other person. This is the mandate provided in section 153C of the Act. In the instant case, if at all, the seized documents referred to in CG/1 to 11 and CG/HD/1 is stated to be belonging to assessee herein, then the only legal recourse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd and seized in the course of search conducted in the premises / case of Shri. Manoj Kumar Jain, while framing the order of assessment under section 143(3) of the Act in the case on hand. As a matter of fact, the ongoing assessment proceedings under section 143(3) of the Act would abate on receipt of these seized materials as per the second proviso to section 153C of the Act. We are of the view that in the event the AO wanted to take cognizance of the seized materials, he ought to have invoked the provisions section 153C of the Act after recording his satisfaction based on material sent by the AO of Shri. Manoj Kumar Jain. This jurisdictional pre-condition laid down by the Legislature of recording of satisfaction for taking action under section 153C of the Act cannot be side-stepped / brushed aside and additions be made in proceedings pending under section 143(3) of the Act as the scope of assessments framed under sections 143(3) and 153C of the Act are quite different. In that view of the matter, we hold that the protective additions made by the AO in the impugned order of assessment for Assessment Year 2008-09 dated 31.12.2009, are contrary to the provisions of the Act and are t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acceded to, the said payment of lease rent on land has to be treated as advance rent and the same is to be allowed deduction under section 37(1) of the Act. In support of this proposition, the learned AR placed reliance on the decision of the Co-ordinate Bench of this Tribunal in the case of V. S. Lad Sons Vs. ACIT in ITA Nos. 18 to 20/Bang/2013, 144 to 146/Bang/2013 dated 13.06.2014. 8.2 Per contra, the learned DR for Revenue supported the orders of the authorities below. 8.3.1 We have considered the rival submissions and carefully perused the material on record; including the judicial pronouncement cited. Similar issues were considered and decided by a Co-ordinate Bench of this Tribunal in the case of M/s. V. S. Lad Sons Vs. ACIT in ITA Nos.18 to 20/Bang/2013 and 144 to 146/Bang/2013 dated 13.06.2014, wherein it was held that the amount paid as lease rent for acquiring leasehold rights over the land cannot be considered as plant and the lease rent paid for acquiring leasehold rights over the land cannot be treated as cost of the plant (Windmill). However, the alternate claim has been allowed by treating the said payment of lease rent as an allowable revenue expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Assistant Development Commissioner, ESEZ, Bangalore, is also not in dispute. The AO has held that the sales made to M/s. V. S. Lad Sons by the assessee are local sales and cannot be treated as deemed exports as the transaction took place in India. Further, the AO was of the view that sale by one EOU to another EOU is treated as deemed export only for the purpose of duty draw back and this does not have any impact for determining benefit under the Income Tax Act, 1961 for the purposes of section 10B of the Act. In coming to this view, the authorities below have placed reliance on the decision of the Co-ordinate Bench of this Tribunal in the case of Tata Elxsi Ltd., Vs. ACIT (2008) 115 TTJ (Bang) 423 and disallowed the assessee s claim of deduction under section 10B of the Act. The learned AR submitted that the aforesaid decision relied upon by the AO in the order of assessment and by the CIT(A) in his impugned order has since been reversed by the Hon ble Karnataka High Court vide its order reported in (2015) 127 DRT 327 (Kar). It was submitted that the Hon ble Karnataka High Court followed its own decision in Tata Elxsi Ltd., Vs. ACIT (supra), while deciding the case of P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... toms Act. However, for the purpose of Exim Policy, it is treated as 'deemed export'. Therefore, when s. 10A of the Act was introduced to give effect to the Exim Policy. the supplies made from one STP to another STP has to be treated as 'deemed export' because cl. 6.19 specifically provides for export through status holder. It provides that an EOU/EHTP/STP/BTP unit may export goods manufactured /software developed by it through other exporter or status bolder recognized under this policy or any other EOU/EHTP/STP/SEZ/BTP unit. What follows from this provision is that to be eligible for exemption from payment of income-tax, export should earn foreign exchange. it does not mean that the undertaking should personally export goods manufactured/software developed by it outside the country. It may export out of India by itself or exported out of India through any other STP unit. Once the goods manufactured by the assessee is shown to have been exported out of India either by the assessee or by another STP unit and foreign exchange is directly attributable to such export, then s. I OA of the Act is attracted and such exporter is entitled to benefit of deduction of such prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd / seized in the course of search conducted in the case of Shri. Manoj Kumar Jain could not be used in the impugned order of assessment for Assessment Year 2008-09 which is framed under section 143(3) of the Act without following the procedure laid down under section 153C of the Act. On this ground itself, we have deleted the addition of ₹ 6,45,000/-. Therefore, there is no need for rendering any separate findings on this ground No.4 raised by the assessee. This ground is accordingly disposed off as infructuous. 11. In the result, the assessee s appeal for Assessment Year 2008-09 is partly allowed. Revenue s Appeal in ITA No.204/Bang/2013 for Assessment Year 2008-09 12. Ground No.1 Deletion of Substantive addition of ₹ 28 Crores. Ground No.2 Deletion of Protective addition of ₹ 13,41,36,761/-. 12.1 In respect of these grounds (supra), the learned DR for Revenue contends that the CIT(A) was not justified in deleting these additions by placing reliance on the order of CIT(A) VI, Bangalore, in the case of Shri. Manoj Kumar Jain and from the statements recorded from him it was very clear that the assessee had entered into transactions of unaccou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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