DCIT Vs Paresh K. Shah (ITAT Mumbai)
Conclusion: Since the date of initiation of search u/s 132 for the purpose of an assessment u/s 153C had to be construed as the date of receiving the books of account by the AO having jurisdiction over such other person, from the A.O. of the searched person, the period of six years was to be reckoned from the date of recording of such ‘satisfaction’, which would thus take within its sweep the period relevant to Assessment Years: 2008-2009 to 2013-2014. Accordingly, the case of assessee for the year under consideration i.e. A.Y.2007-2008 would not fall within the scope and gamut of the period for which assessment proceedings u/s153C could be framed.
Held: During the search proceedings, it was found that the concern viz. M/s Gold Sukh Safety Vaults Ltd. was making the lockers available to hawala operators who were engaged in illegal transfer of cash and the contents of the locker No.596 belonged to assessee. AO noticed that the same were the income tax and sales tax related documents of a number of concerns. On the basis of certain details gathered by AO, it came to his notice that names of number of concerns, whose documents were found from the aforesaid locker figured in the list of the accommodation entry providers published by the Sales Tax Department, Govt. of Maharashtra. AO issued a show cause letter to assessee and called upon him to explain the above mentioned hawala parties, which were engaged in the business of providing accommodation entries and were being controlled by him. It was also brought to the notice of assessee that in the absence of any plausible reply, it should be inferred that he was getting commission on such bogus transactions. Aggrieved, assessee carried the matter before the CIT(A). CIT(A) was of the view that as substantial infrastructure would have been required by the assessee for carrying on the business of an accommodation entry provider as an owner of the aforementioned 53 bogus concerns, which however was not the case, therefore, in the totality of the facts it could safely be concluded that he had rendered his services as a facilitator for the accommodation entry providers and had earned commission income therefrom. CIT(A) had taken the commission income of assessee @0.05% of the aggregate of the turnovers of the said 53 concerns during the respective years. CIT(A) upheld the view taken by the AO that assessee was engaged in the business of providing bogus accommodation entries to 3rd parties, however, he held a conviction that assessee was merely a facilitator and not the owner of the said bogus concerns. As such, the CIT(A) backed by his aforesaid conviction restricted the addition in the hands of the assessee by adopting the rate of commission @ 0.05% of the aggregate of the turnovers of the aforesaid parties during the respective years. It was held that the ‘satisfaction’ of the A.O of the assessee i.e the person other than the searched person was recorded on 15.01.2014. As such, the period of six years was to be reckoned from the date of recording of such ‘satisfaction’, which would thus take within its sweep the period relevant to Assessment Years: 2008-2009 to 2013-2014. Accordingly, the case of assessee for the year under consideration i.e. A.Y.2007-2008 would not fall within the scope and gamut of the period for which assessment proceedings u/s153C could be framed. Accordingly, AO was directed to verify the factual position as regards the date on which the books of accounts or documents or assets seized during the course of search proceedings were delivered by the AO of the searched person to the AO of the assessee i.e the person other than the searched person. Apart there from, in case the AO of the searched person and that of the assessee was the same person, then the date of recording of „satisfaction‟ by the A.O in the file of the assessee i.e the person other than the searched person, shall be taken as the relevant date for reckoning the period of six assessment years for which assessments could have been framed u/s 153C. In case, the claim of assessee that the year under consideration vis. A.Y.2007-2008 fell beyond the scope of six assessment years from the aforementioned date of recording of satisfaction or receiving of documents or assets seized or books of accounts by the AO of assessee, the assessment framed by AO should stand vacate.
FULL TEXT OF THE ITAT JUDGEMENT
The above mentioned cross appeals filed by the assessee and the revenue are directed against a common order passed by the CIT(A)-48, Mumbai, dated 16.10.2017 for the assessment years 20072008 to 2013-2014. As the issues involved in all these appeals are identical, except for in the case of A.Y 2008-08 where the assessee has also assailed by way of an additional ground of appeal the validity of the jurisdiction assumed by the A.O for framing the assessment u/s 153C r.w.s 143(3) of the Income-tax Act, 1961 (for short “I-T Act”), therefore, the said appeals are being disposed off by way of a consolidated order. For the sake of convenience, first we shall take up the appeal of the assessee for the assessment year 2007-2008 in ITA No.7374/Mum/2017. The assessee assailing the order of the CIT(A) has raised before us the following grounds of appeal :-
“1. The authorities below have erred in initiating and completing assessment/ upholding such initiation and completion; under Section 153C in the absence of any incriminating material found or seized, without any factual or legal basis, without mentioning or establishing any relationship between the searched person and the appellant and without making due enquiries.
2. The authorities below have erred in passing the assessment order / upholding the order on the basis of information gathered from Sales Tax Department in respect of parties whose details are included in para 4(3)(v) and list B of the assessment order but without communicating anything to the appellant in this regard.
3. The authorities below have erred in assessing the income/ upholding the assessment without specifying the section or head of the Income Tax Act, 1961 under which it is taxable.
4. The authorities below have erred in taxing the short term capital gain/upholding the same at normal rates instead of the prescribed rate of 10%.”
2. Further, the assessee has also raised an additional ground of appeal for the year under consideration viz. A.Y 2007-08, which reads as under :-
“The above appeal was slated to be heard on 01.04.2019 and after part hearing it was adjourned to 04.04.2019. Now it is to be heard on 10.05.2019. The appellant requests the Hon. Bench to admit the enclosed additional ground of appeal.”
3. As the assessee by raising the aforementioned additional ground of appeal has assailed the validity of the jurisdiction assumed by the A.O u/s.153C of the Income-tax act, 1961 (for short “I-T Act”), therefore, the same being purely a legal issue, is admitted in the backdrop of the judgment of the Hon‟ble Supreme Court in the case of CIT Vs. National Thermal Power Corporation (1998) 229 ITR 383 (SC).
4. Briefly stated, the assessee had filed his return of income for A.Y 2007-2008 on 31.07.2007, declaring total income at Rs.1,75,010/-. Search and seizure proceedings u/s.132 of the I-T Act were conducted on 08-11-2012 by the ADIT(Inv.), Unit-IV, Mumbai in the case of M/s Patel Ashokkumar Mohanlal Ni Co.(Proprietor Shri Ashokkumar Mohanbhai Patel). Simultaneously, search and seizure action was also carried out in the case of M/s Gold Sukh Safety Vaults Ltd, a concern which was engaged in the business of providing lockers on rent. In the course of search & seizure proceedings, it was revealed that M/s Gold Sukh Safety Vaults Ltd. was providing lockers without verification of KYC details. As a matter of practice, though the lockers were assigned in the name of first holder, however, the same could also be operated by three more persons whose names would be incorporated in the agreement. It was observed during the course of search proceedings that no KYC details were obtained for the additional operators of the locker. In the course of post search proceedings, it was gathered that the aforementioned concern viz. M/s Gold Sukh Safety Vaults Ltd. was making the lockers available to hawala operators who were engaged in illegal transfer of cash.
5. During the course of search and seizure action in the case of M/s Patel Ashokkumar Mohanlal Ni Co. (Proprietor Shri Ashokkumar Mohanbhai Patel), the followings premises were covered :-
a) Juna Angadia, 1st Floor, 142 F Block, Lalbaba Haveli, Bhuleshwar, Mumbaoi-400002(Warrant No.8472); and
b) Locker No.596 at M/s Gold Sukh Safety Vaults Ltd., 65, Vithalwadi, Mumbai-400020 (Warrant No.8473).
6. In the course of search proceedings, cash amounting to Rs.11,00,000/- and silver weighing 11.2 Kg. valuing Rs.7,23,060/-, alongwith certain incriminating documents viz. „loose paper files‟ containing the income-tax and sales tax related documents of third parties, were found and seized from the aforementioned locker No.596 and inventorised as Annexure A/1 to A/4 of Panchanama, dated 20.11.2012. As was discernible from the records of M/s Gold Sukh Safety Vaults Ltd., the authorization in respect of locker was though issued in the name of M/s Patel Ashokkumar Mohanlal Ni Co., however, the locker was found to be allotted in the name of the assessee. In the backdrop of the aforesaid facts the statement of the assessee was recorded u/s. 132(4) of the I-T Act on 20.11.2012. Initially, the assessee in his statement distanced himself from the aforementioned concern viz. M/s Patel Ashokkumar Mohanlal Ni Co. and claimed that he was not aware of any such entity. However, at the same time, the assessee stated that the cash of Rs.11,00,000/- and silver valued at Rs.7,23,060/- that was found and seized from the aforesaid locker No. 596 belonged to him. On the basis of the incriminating material and the valuables found and seized from the locker, proceedings u/s.153C of the I.T Act were initiated in the case of the assessee. In compliance to the notice issued to the assessee u/s.153C r.w.s.153A of the Act, the assessee filed a copy of his „Original‟ return of income for the year under consideration viz. A.Y.2007-2008, that was earlier filed by him u/s 139(1) on 31.07.2007.
7. During the course of assessment proceedings, it was observed by the A.O that though the assessee had initially in his „statement‟ recorded u/s.132(4) of the I-T Act stated that the contents of the locker No.596 belonged to him, however, in the post search proceedings, he changed his stand and in reply to question No.4 & 5 of his statement recorded u/s.131 of the I-T Act, dated 02.02.2013 stated that the seized documents viz. Annexure-A/1 to A/4 did not belong to him. On a perusal of the seized documents as were found and seized from locker No.596 viz. Annexure-A/1 to A/4, it was noticed by the A.O that the same were the income tax and sales tax related documents of a number of concerns. On the basis of certain details gathered by the A.O, it came to his notice that names of number of concerns, whose documents were found from the aforesaid locker figured in the list of the accommodation entry providers published by the Sales Tax Department, Govt. of Maharashtra. In the backdrop of the aforesaid facts, the A.O issued a „Show cause‟ letter, dated 02.03.2015 to the assessee and called upon him to explain as to why it may not be inferred that the above mentioned hawala parties, which were engaged in the business of providing accommodation entries were being controlled by him. It was also brought to the notice of the assessee that in the absence of any plausible reply, it shall be inferred that he was getting commission on such bogus transactions. Apart there from, it was made clear to the assessee that as per the provisions of Section 132(4A) of the I-T Act, it was to be presumed that the documents found and seized from his locker belonged to him.
8. As no details as regards the turnover of the entities whose documents were found from the locker of the assessee were made available to the A.O, therefore, he obtained the requisite details from the Economics Intelligence Unit of Sales Tax Department, Mumbai, as under:-
