TMI Blog2022 (6) TMI 482X X X X Extracts X X X X X X X X Extracts X X X X ..... dy has assessed the investments found in those documents in the hands of Shri Somashekara Reddy. The addition should be made in the hands of other person to whom the documents belong/pertain to and this is the whole concept of sec.153C of the Act. Once these documents have been accepted to belong to the searched person and further the AO has assessed the investments found in the said documents in the hands of the searched person, the question of considering the same as belonging/pertaining to some other person will not arise. Hence the so called satisfaction recorded by the AO of the searched person can only said to be a mechanical satisfaction and not objective satisfaction as contemplated in sec.153C of the Act. It is a case of mechanical transfer of the impugned documents to the assessing officer of the assessee herein. We also noticed earlier that the AO of the assessee herein has not made any addition on the basis of the above said documents, which are said to belong to the assessee herein . This factfurther reinforces our view that, in the facts and circumstances of the case discussed above, there was no objective satisfaction as contemplated u/s 153C of the Act. Accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustice, if the addition made by the A.O. is restricted to Rs.50 lakhs and the same, in our view, would take care of further deficiencies, revenue leakages, if any, in the maintenance of books of accounts. - ITA Nos.947 & 948/Bang/2013 - - - Dated:- 28-4-2022 - SHRI B. R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER Appellant by : Shri H. Siva Prasad Reddy, ITP, A.R. Respondent by : Shri Sameer Kumar Singh, D.R. ORDER PER B.R. BASKARAN, ACCOUNTANT MEMBER: Both the appeals filed by the assessee are directed against the orders passed by Ld. CIT(A), Mysuru and they relate to the assessment years 2007-08 2008-09. Both the appeals were heard together and are being disposed of by this common order, for the sake of convenience. 2. The facts relating to the case are stated in brief. Both these appeals were earlier disposed of by the Tribunal on 28.8.2014. The assessee challenged the decision rendered by the Tribunal in both the yeas by filing appeals before Hon ble High Court of Karnataka. The Hon ble High Court restored all the issues to the file of the ITAT with the following observations:- 5. Having heard learned Senior Counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r reconsideration in accordance with law, in light of the aforesaid decisions of this Court as well as of the Hon'ble Supreme Court. 11. All contentions on both sides are left open. Appeals are disposed off in the aforesaid terms. 12. In view of the disposal of the appeals, I.A. No.1/2018 in both the appeals stand disposed off. Accordingly, these appeals were posted for hearing before us. We notice that the Hon ble High Court has directed to decide the appeals afresh on all issues. 3. The assessee herein is a wife of Shri Soma Sekhar Reddy. The above said Shri Soma Sekhar Reddy was subjected to search u/s 132 of the Income-tax Act,1961 ['the Act' for short] on 26.10.2007. According to the A.O., certain documents marked expenditure A1-page 43-84 relating to the assessee was seized during the course of search. Accordingly, the A.O. reopened the assessment u/s 153C of the Act in the hands of the assessee (though erroneously mentioned as section 153A in the assessment order). The A.O. completed the assessment of assessment year 2007-08 u/s 153C r.w.s. 143(3) of the Act. It is pertinent to note that the AO did not make any addition on the basis of above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to Shri Somashekhar Reddy only and further assessed the amount mentioned in those documents in his hands. Accordingly, he contended that these documents cannot be considered as belonging to some other person as contemplated u/s 153C of the Act. He submitted that, if the AO of Shri Somashekara Reddy was satisfied that these documents do not belong to Shri Somashekara Reddy, he would not have made any addition on the basis of these documents in his hands. If has considered these documents as belonging to Smt Vijaya, the assessee herein, then he should have recorded satisfaction in that regard and accordingly he should have transferred to the AO of Smt Vijaya. Accordingly, the Ld A.R submitted that, in the facts and circumstances of the case, these documents cannot be considered as belonging to the assessee herein and hence the AO of Shri Somashekara Reddy cannot be considered to have arrived at an objective satisfaction that these documents belong to the assessee herein. Accordingly the Ld A.R submitted that, in the absence of objective satisfaction as contemplated u/s 153C of the Act, the A.O. could not have initiated proceedings in the hands of the assessee u/s 153C of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g/pertain to. The legal position in this regard has been discussed by the co-ordinate bench in the case of Shri T H Suresh Babu (supra) as under:- 30. Again, the Hon'ble Delhi High Court in the case of Pepsico India Holdings (P.) Ltd. v. Asstt. CIT [2015] 370 ITR 295/228 Taxman 116 (Mag.)/[2014] 50 taxmann.com 299 following its earlier decision in the case of Pepsi Foods (P.) Ltd (supra) held that unless it is established that the documents in question do not belong to the searched person, the question of invoking the provisions of sec.153C of the Act does not arise. It was also held that unless searched person disclaims the documents as belonging to him, provisions of sec.153C do not get attracted. It is also further laid down that in the satisfaction note there should be something to indicate that the seized document do not belong to the searched person. The Hon'ble Delhi High Court held as follows:- 'Having set out the position in law in the decision of this Court in the case of Pepsi Foods Pvt. Ltd. (supra), it must be seen as to whether the Assessing Officer of the searched person (the Jaipuria Group) could be said to have arrived at a satisfaction that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 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. In view of the foregoing discussion, we do not find that the ingredients of Section 153C of the said Act have been satisfied in this case. Consequently the notices dated 02.08.2013 issued under Section 153C of the said Act are quashed. Accordingly all proceedings pursuant thereto stand quashed.' 31. Similarly, the Hon'ble Gujarat High Court in the case of VijaybhaiN.Chandrani v. Asstt. CIT [2011] 333 ITR 436 held that even if there is a reference to the assessee in the seized documents, it does not mean that the assessee is the owner of those documents unless the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arched person and whereas the original may be owned by some other person. 33. Further, the Hon'ble Supreme Court in M/s Calcutta Knitwears :2014] 43 taxmann.com 446 (SC) held that existence of cogent and demonstrating material is germane to the assessing officers' satisfaction in concluding that the seized documents belong to a person other than the searched person is necessary for initiation of action u/s 158BD. The ratio decidendi of this decision applies to the proceedings u/s 153C also, since sections 158BD 153C are substantially parimateria`. 34. The Hon'ble High Court of Delhi in Canyon Financial Services Ltd (2017) 84 taxman.com 71 (Delhi) held that the AO of the searched person had not proved that the seized document belonged to the assessee and not to the searched person. 35. The ITAT, Bangalore, Bench 'B' in Senate [2016] 68 taxmann.com 223 (Bangalore-Trib.) held that there should be something in the satisfaction recorded by the AO of the searched person to indicate that the searched person had disclaimed the seized documents before reaching a conclusion/satisfaction that the documents do not belong to the searched person but to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objective satisfaction as contemplated u/s 153C of the Act. Accordingly, we find merit in the contentions of the assessee that the very initiation of proceedings u/s 153C of the Act in the hands of the assessee for assessment year 2007-08 is not in accordance with the law and hence the assessment order is liable to be quashed. Accordingly, we quash the orders passed by Ld. CIT(A) and assessing officer for AY 2007-08 for the detailed reasons discussed above. 9. Since we have quashed the assessment order passed by the A.O. for AY 2007-08, the additions made by the AO on merits would fall in the ground and they do not require adjudication. 10. Now we shall take up the appeal filed by the assessee for assessment year 2008-09. In this year, the assessee raised following grounds:- 1. The order of the Commissioner of Income Tax Appeals (CIT (A)) is opposed to the facts of the case and law and it is prejudicial to the interest of the appellant assessee. 2. The CIT (A) ought to have appreciated that there was no incriminating materials seized belonging to the assessee and therefore, the proceeding initiated u/s 153C R.W.S 143(3) are bad in law and liable to be quashed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and the same was surrendered by the assessee in the revised return filed on 29.5.2009. The A.O, after carrying out certain analysis, took the view that the trading liability declared by the assessee is in excess. Accordingly, he assessed following amount as excess and unproved trading liability in the hands of the assessee:- The Ld. CIT(A) also confirmed the same and hence the assessee has filed this appeal before us. 13. The back ground of making above said additions are explained briefly. (a) Addition of Rs.1,72,75,247/- Out of the trading liabilities of Rs.11,04,45,695/-, the AO deducted opening balance as on 1.4.2007 of Rs.3,99,39,296/- and the expenditure incurred during the year under consideration of Rs.5,32,31,152/-. The balance amount was Rs.1,72,75,247/-. The AO took the view that the above said amount is an unexplained credit. (b) Addition of Rs.1,10,40,220/- This amount forms part of opening balance of Rs.3,99,39,296/-. According to the AO, this amount pertains to the trading liability incurred during February and March, 2007. The AO took the view that this amount represents payments due to rural poor labourers, who could not afforded credit to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e related to transportation charges and labour charges who could not give credit to the assessee herein. Hence, the trading liabilities were taken as unproved by the A.O. 17. We heard the parties on this issue and perused the record. The admitted fact is that the outstanding liability of Rs.11.04 crores disclosed by the assessee in the balance sheet as on 31.3.2008 pertains to trading liabilities and they arise out of trading results. The AO has considered the amount of Rs.1,72,75,247/- only, as not arising out of trading results. There is no dispute with regard to the fact that the assessee has maintained books of accounts and the Balance sheet has been prepared out of the book results only. The Ld. A.R. also submitted that the assessee was also handicapped in providing relevant information and explanations, since the books of accounts have been seized by the various statutory authorities. Accordingly, it could be understood that the assessing officer could not examine relevant books of accounts. Accordingly, it can be seen that the AO has considered the amount of Rs.1,72,75,247/- as not arising out of trading transactions on surmises only. In our view, without examining the bo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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