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TMI Blog2021 (12) TMI 921X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee in these years filed original returns of income for the AYs 2006-07 to 2009-10. There was a search in the Dayanand Pai group cases u/s. 132 of the Act. During the course of search in the residence of employee, Smt. Adlene Kagoo on 12.4.2011, certain data pertaining to the transaction with Dayanand Pai and Shri Anand Nadig was seized. Consequent survey operation was conducted in the case of the firm, M/s D N Associates where assessee is a partner wherein a statement was recorded from CEO of the firm, Shri K. Purushothama Adiga who admitted the transactions with Shri Dayanand Pai. Consequently assessments were reopened for AYs 2006-07 to 2009- 10 by issue of notice u/s. 148 of the Act and additions made as follows:- Asst. Year Addition u/s. 68 Addition u/s. 69 2006-07 - 16,11,774 2007-08 86,00,000 - 2008-09 2,25,100 - 2009-10 11,00,000 - 5. Now the contention of the ld. AR is that the assessments made for these years consequent to search action in the case of Dayanand Pai group cases should have been made u/s. 153C instead of 148 of the Act. According to the ld. AR, the material on the basis of which addition was made were all unearthed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 16,11,774 on various dates for AY 2006-07. 8. Further, there was a survey conducted in the premises of D N Associates on 26.3.2011 and statement was recorded from Shri Purushothamma Adiga, CEO of Damanagiri Properties & Developers. In Q.No.10 put to Purushothamma Adiga, the transaction with Dayananda Pai was questioned and he replied the amount of Rs. 6 crores has been paid on different dates by Dayananda Pai towards advance for property at Devanahalli and also that out of Rs. 6 crores paid, Rs. 86 lakhs is by cheque and Rs. 5.14 crores by cash. He also confirmed that at the time of earlier survey conducted in the case of D N Associates, additional income of Rs. 6 crores has been declared in AY 2007-08 and Rs. 50 lakhs in AY 2008-09, totalling to Rs. 4.14 crores admitted in the hands of D N Associates on this count. There were also various transactions with Anand Nadig and Dayananda Pai. Statement from Ananda Nadig u/s. 131 was recorded on 26.3.2011 in the course of the statement Ananda Nadig has confirmed the transaction reflected in DTTE. One such transaction confirmed is to the tune of Rs. 16,11,774 received in FY 2005-06 towards meeting day to day expenditure. It was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of search action belonged to present assessee. In the present case, DTTE did not belong to the assessee, though it contains information pertaining to the assessee. As such, the provisions of section 153C cannot be applied to the facts of the assessee's case. Being so, in the present case, it is not possible for the AO to assume jurisdiction u/s. 153C of the Act since the pre-requisite is that any money, bullion, jewellery or other valuable article or things or books of account or documents seized or requisitioned belong or belongs to a person other than the person in whose case search is conducted u/s. 132 of the Act. Therefore, initiation of section 153 of the Act for framing assessment u/s. 153C r.w.s. 143(3) of the Act is not satisfied. The only way to frame assessment is by way of issue of notice u/s. 148 invoking the provisions of section 147 of the Act which was rightly exercised by the present AO. Accordingly, we do not find any infirmity in the action of the AO for issuing notice u/s. 148 of the Act. This view is supported by the decision of the Ahmedabad Bench of ITAT in Shailesh S. Patel v. ITO, 97 taxmann.com 570 (Ahd. Trib.) wherein it was held as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion belonging to assessee implies something more than idea of casual association. It was observed by the Hon'ble Delhi High Court that s. 153C cannot be invoked unless the AO is satisfied for cogent reasons that the seized documents do not belong to the searched person. It was observed that finding of photocopies with the searched person does not necessarily mean and imply that they "belong" to the person holding the originals. The distinction between "belongs to" and "relates to" or "refers to" must be borne in mind by the AO. The Assessing Officers should not confuse the expression "belongs to" with the expressions "relates to" or "refers to". The Hon'ble Court went on the explain the purport of the expression by giving illustration that a registered sale deed, for example, "belongs to" the purchaser of the property although it obviously "relates to" or "refers to" the vendor. In this example if the purchaser's premises are searched and the registered sale deed is seized, it cannot be said that it "belongs to" the vendor just because his name is mentioned in the document. In the converse case if the vendor's premises are searched and a copy of the sale deed is sei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of s. 132(4A) of the Act whereby the presumption of documents etc. found in course of search weighs towards searched person. 14.3 As noted, post the legislative amendment, any books of account or documents seized or requisitioned requires to be merely pertain to or relate to the assessee in contrast to the earlier position where such books/documents seized etc. must necessarily belong to the third person i.e. assessee herein. Thus, for the assessment year 2012-13 in question, which is governed by pre-amended law of Section 153C of the Act, the provisions of Section 153C of the Act could not be invoked unless document seized etc. 'belongs to' a person (assessee herein) other than the person searched. Thus, while the case of the assessee can be reopened where the document seized in the case of searched person gives rise to reasonable interference of escapement of income in the hands of third person i.e. assessee, same is not true for invoking Section 153C of the Act in the hands of the assessee unless the document seized or requisitioned actually belong to the assessee. Thus, the independent power available to AO of the third person under s.147 of the Act cannot be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9; of AO of searched person. Thus, it is self-evident that two sections operate quite differently. The effect of non-obstante clause under S. 153C is that pending assessment or reassessment proceedings shall abate. Hence, S. 147 will be rendered inoperative and will give way to Section 153C once power under S. 153C are exercised validly. This however is not the same thing to say that there is any statutory compulsion to resort only to mode prescribed under S. 153A/S.153C in the event of search. The scheme of Act does not suggest that mere search action revealing incrementing material against the person other than searched person would automatically oust the power of the AO over the assessee concerned under S. 147 of the Act. The overriding provisions of S. 153C merely enables the AO to set aside the pending reassessment proceedings and grants primacy to Section 153C of the Act. As noted earlier, exercise of power under S. 153C is governed without any stringent fetters of holding 'reason to believe' contemplated under S. 147. Therefore, while exercise of overriding power under S. 153C will render S. 147 otiose, the converse case of clipping the powers available under S. 147 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lene Kagoo, who is stated to be a trusted employee of Shri P. Dayananda Pai (PDP) on 12.4.2011. PDP was also searched on 12.4.2011. PDP was a partner in a firm called Canara Housing Development Company (CHDC). There was also a company by name Century Real Estate Holdings Pvt. Ltd.(Century), which was also controlled by PDP. CHDC and Century and other entities of the group belonging to PDP was also searched on 12.4.2011. In the course of search of PDP certain Compact Discs(CD) were found and seized vide Annexure AK/PDP/06 dated 12.4.2011. The CD contained data pertaining to unaccounted receipts and payments by PDP and Group for the period from 1.4.2002 to 14.6.2008. The data was found with the caption "Dummy(Tally training Environment)" (DTTE). The data contained (i) day to day transactions-cash, bank and journal entries, (ii) Ledger accounts related to transactions in (i) above, (iii) profit and loss accounts for the year ended 31.3.2006 to 31.3.2009 as also the Balance Sheets as at 31.3.2006 to 31.3.2009. PDP and CHDC filed application u/s.245C of the Act on 12.5.2014 before the Hon'ble Settlement Commission, Additional Bench, Chennai (SC) both in the case of PDP and CHDC. PDP own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 006 declaring total income of Rs. 9,83,780/-. In response to the notice u/s.148 of the Act dated 28.3.2013, the Assessee filed copies of the earlier return of income already filed. 18. The AO confronted the Assessee with copy of ledger account of the Assessee which was found in the DTTE. The ledger account copy found was for the period from 7.4.2205 to 7.5.2008 (copy of the same is at page 111 to 114 of the paper book). As far as AY 2006-07 is concerned, the entries showed that the Assessee received a total sum of Rs. 16,11,774 on various dates. It was the plea of the Assessee before the AO that he had declared gross receipts in business of Rs. 48,83,405 in the return of income and the sum of Rs. 16,11,774 is included in the gross receipts. In a statement of the Assessee recorded by the Deputy Director of Income Tax (Inv.), Unit-II (I), Bangalore on 23.6.2011 as part of the post search enquiries, the Assessee stated that the payments reflected in the ledger in his name which is part of the DTTE, the same are payments made for meeting day to day expenditure such as registration of GPA etc., and that the same pertains to PDP. The AO wanted to verify from the Assessing Officer (AO) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iaison and the ledger was an imprest account where sums were spent on behalf of PDP and CHDC and Assessee has no interest whatsoever except as agent of PDP. He reiterated his stand that since the sum was already taxed in the hands of PDP the same cannot be taxed again in the hands of the Assessee. The learned DR relied on the order of the CIT(A). 21. We have carefully considered the rival submissions. It is clear from the order of the SC in the case of CHDC that the entries arising from DTTE were offered to tax by the peak credit method. This has been accepted by the CIT(A). The CIT(A) has however gone on the premise that expenditure of PDP or CHDC would be income in the hands of the Assessee. This is contrary to the claim of PDP that the Assessee was acting as liaison for and on behalf of the Assessee that the ledger account was imprest account meaning thereby that whatever is found in the ledger is entries of PDP and CHDC and the Assessee has no interest whatsoever in respect of the sums reflected in the ledger account. It is undisputed that the entire entries in DTTE were considered in the proceedings before SC in determining the income of PDP and CHDC. Therefore the claim of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 12.8.2006, 2.11.2006, 18.11.2006 and 23.11.2006 wherein there is a description of cash received of Rs. 36,00,000, Rs. 25,00,000, Rs. 19.50,000 and Rs. 5,50,000 (total of the above sum is a sum of Rs. 86 lacs) respectively towards Devanahalli Dhaba property by the Assessee by cash. With regard to the sum of Rs. 86 lacs, the Assessee was called upon to explain cash of Rs. 86 lacs. The Assessee in his reply to the AO dated 9.12.2014 denied the transaction. The AO added a sum of Rs. 86 lacs u/s.68 of the Act. It is not clear how the addition was made u/s.68 of the Act because the description in the ledger of PDP is cash received by PDP and therefore the addition if at all should have been made u/s.69A of the Act as unexplained money. 23. Aggrieved by the aforesaid addition the Assessee filed appeal before CIT(A) and reiterated contentions that were identical to the contention set forth in AY 2006-07 apart from contenting that the entries relate to the firm and not to him in his individual capacity. The CIT(A) for the very same reasons given for rejecting the plea of the Assessee in AY 2006-07, rejected the plea of the Assessee in this year i.e., AY 2007-08 also. Aggrieved by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i property Rs. 50 lacs through Anand Nadig i.e., the Assessee towards Devanahalli Dhaba property through the Assessee. 27. The Assessee reiterated his stand as in AY 2006-07 that he was doing liaison work for PDP and CHDC and that whatever was found in the ledger account is imprest account and monies spent on behalf of PDP or CHDC and since the sums have been offered to tax by PDP and CHDC in the proceedings before SC, the same cannot be regarded as income of the Assessee. As far as entry found in the ledger account of M/S.D.N. Associates is concerned, the Assessee disowned the transaction. 28. The AO however for identical reasons given for making addition in AY 2006-07 & 2007-08 added a sum of Rs. 2,25,10,000/- (Rs. 1,75,10,000 + Rs. 50,00,000). The CIT(A) confirmed the action of the AO, hence appeal by the Assessee before the Tribunal. 29. We have heard the rival submissions, which were identical to the submissions made in AY 2006-07 & 2007-08. We have while deciding the issue with regard to entry in the ledger account in the name of the Assessee (to the extent of Rs. 1,75,10,000/- in AY 2008-09) already held that the sums were offered to tax by PDP and CHDC before the SC and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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