Evidently, AO on the basis of a letter written by the company, which was returned by the assessee by putting its signature and seal in confirmation of the accounts, had framed the assessment under section 153C. However, the said document could not be said to belong to assessee inasmuch as besides assessee there were so many names and it could not be said that these documents belonged to them. It would lead to some absurd conclusions or consequences to say that when a person maintains a list of their shareholders, such document belongs to or pertains to such shareholders also. These documents only showed that the appellant company had invested in the share capital which is not in dispute. Considering, these factors it has to be held that there are no documents belonging to the assessee which has been seized from the premises of M/s Gee Ispat Pvt. Ltd. Therefore, order passed under section 153C was quashed.
FULL TEXT OF THE ITAT JUDGMENT
This is an appeal by the Revenue against the orders dated 31.01.2014 in Appeal No. 1218/2011-12 passed by the Ld. that Commissioner of income tax (Appeals)-XXXI, New Delhi (for short
hereinafter referred to as “Ld. CITA”).
2. Brief facts of the case are that in the search action that took place on 1.2010 in M/s Gee Ispat group of companies, three documents enumerated at exhibit A1, A8 and A11 allegedly pertaining to the assessee were recovered from such premises and basing on those documents, learned AO recorded the following reason for Asstt. Years 2004-05 to 2009-10 initiated proceedings u/s 153C of the Act:
“A search and seizure operation, was carried on Gee Ispat Group of cases on 7th January, 2010. In the course of search various premises were covered. Large number of ‘incriminating’ documents and loose papers were found and seized. Examination of pages no. 29 & 30 of annexure A-ll, seized by party ZO-1, from the premises of M/s Gee Ispat Private Limited, reveals an account between M/s. Esteem Textiles Private Limited & Gee Ispat Private, Limited. Further page no. 4 of annexure AS seized from the same premises reveals investments made by M/s Esteem Textiles Private Limited in the share capital of M/s. Gee Ispat Private Limited. Further details are not completely available Annexure A-1, page no. 28 exhibits an investment of Rs. 5 lac in the share capital of M/s Gee Ispat Pvt. Ltd. No Warrant of Authorization was issued in the name of M/s. Esteem Textiles Private Limited, thus no action in the case of the assessee company could be initiated under section 153A of the Act. On the basis of documents found and seized belonging to M/s Esteem Textiles Private Limited. I am satisfied that the case of the assessee company is covered under section 153C of the Income Tax Act, 1961. Accordingly, notices under section 153C of the Income Tax Act, 1961 are issued for the assessment years 2004 -05 to 2009-1 0.
3. Subsequently, learned AO, by order dated 21.12.2011, made an addition of Rs.1,53,50,000/- on account of share capital and premium. In appeal, learned CIT(A) held that no document belonging to the assessee seized from M/s Gee Ispat P. Ltd. and while agreeing with the submissions of the assessee, he returned the finding that proceedings u/s 153C of the Income-tax Act, 1961 (“the Act”) were wrongly invoked and they are void ab initio for incorrect assumption of jurisdiction u/s 153C of the Act. Hence, the revenue is before us in this appeal.
4. It is the submission of the learned DR that Exhibit A1, A8 and A11 documents which were found during the search are pertaining to the assessee and also were incriminatory in nature. She further submitted that a bare reading of the provisions of Section 153C, it is clear that the basic requisite to issue notice u/s 153C is that the AO is satisfied that any book or account or document seized belong or belongs to the person other than the one referred to u/s 153A and if the AO is so satisfied, he had jurisdiction to assess or re-assess such income according to the provisions u/s 153A. Further she submitted that requirement of Section 153C with reference to satisfaction seems to be only prima facie satisfaction and not formal conclusive satisfaction that the document found in the course of search belongs to the person other than one searched. Placing reliance on the decision reported in the case of Manish Maheshwari vs ACIT, 289 ITR 341 (SC), she submitted that though such decision was rendered in context of Section 158BD it is equally applicable to Section 153C also.
5. Learned DR’s main reliance is on the decision reported in the case of SSP Aviation Ltd. vs DCIT (2012) 346 ITR 177 (Del) wherein it was held that in view of the provisions of Section 153C, satisfaction that is required to be reached by the AO having jurisdiction over the searched person is that the document etc. seized during search belong to a person other than searched person. Basing on the decision reported in Dr. K.M. Mehaboob vs DCIT (2012) 211 Taxman 52 (Ker), she submitted that for transferring file u/s 153C, there is no need to examine whether evidence or material seized in search action represents or proves undisclosed income of another persons. Nextly, she submitted that the words ‘belong to’ not necessarily connote the ownership or proprietorship but they indicate pertaining to having a right or possession. Whether such a document is disclosed by other person or not, may not have much bearing as far as the Assessing Officer of the person searched is concerned since he has to only be prima facie satisfied that such assets, etc. belong to other person. In support of this contention, learned DR referred to a plethora of case laws which includes the decision of the Hon’ble Kerala High Court in the case of E.N.Gopakumar vs CIT (2016) 75 Taxmann.com215 (Kerala) etc.
6. Per contra, it is the argument of the learned AR that none of the documents seized from the premises of M/s Gee Ispat P. Ltd. belonging to the assessee, as such, the jurisdiction u/s 153C of the Act was wrongly invoked by the AO in this matter and was rightly held so by the learned CIT(A). Placing reliance on the decision reported in Pepsi Food Ltd. vs ITO, 367 ITR 112 (Del) and M/s Pepsi India Ltd. vs ACIT, 370 ITR 295, he submitted that whenever a document is found from a person, who is being searched, normal presumption is that the said documents belongs to the person searched. It is for the AO to rebut that presumption and come to a conclusion or satisfaction that the document, in fact, belongs to somebody else. He submits that in the absence of any cogent material available with the AO before arriving at the satisfaction that the seized document does not belong to the searched person but to somebody else, any order passed on surmises and conjectures cannot stand.
7. He submits that it is nobody’s case that the Jaipuria group had at any point of time disclaimed the documents as belonging to them and unless and until it is established that the document do not belong to the searched person, provisions u/s 153C of the Act cannot be invoked. More particularly in this matter, the photocopies in the possession of the searched person do not necessarily mean or imply that they belong to the person who holds the originals. It is not permissible under law to reach the other person only by making a distinction between the ownership of the photo copy and the ownership of the original. He further submitted that there is confusion in the mind of the AO on the aspect of the expression “belong to”, “relate to” or “reference to”. He submitted that a bare perusal of the documents in Exhibit A1, A8 and A11 clearly establishes that none of these documents can be said to be belonging to the assessee. Reliance is placed on the instructions dated 3.2014 in F.No.299/128/2013/DIR(Inv.III)/547 issued by the CBDT. Lastly, he submitted that there is nothing incriminatory that is recovered in this matter, as such, exercise of jurisdiction by the learned AO is bad in law. Reliance is placed on the decision reported in CIT vs RRJ Securities Ltd., 380 ITR 612 (Del) and CIT vs Singhad Technical Education Society, 120 DTR 79.
8. We have gone through the record in the light of the submissions on either Exhibit A1 is containing page no.28. It contains the print out of list of names giving the amount in the number of shares allotted wherein the name of the assessee company shows the number of shares allotted as 50,000 and the amount at Rs.5 lacs. Exhibit A8 is the index sheet super-scribed as share capital and showing the name of the assessee at S.No.6 against which the folio numbers mentioned are 7,8. Exhibit A11 contains two leaves numbered as page 29 and 30. These two are the copies of confirmation of accounts of Assessee Company as existed in the books of accounts of M/s Gee Ispat P. Ltd. As a matter of fact, there is no dispute as to the documents or the contents thereof. The real question is whether do they constitute any document or account belonging to or pertain to the assessee u/s 153C of the Act.
9. On this aspect, learned CIT(A) observed as follows:
“3.8 Page No. 29 and 30 Annexure A-l are duplicate copies of confirmation of accounts of the appellant company in the books of M/s Gee Ispat Pvt. Ltd. From the contents of the said pages, it is seen that the confirmation of accounts is in the form of letter addressed by M/s Gee” Ispat Pvt. Ltd. to the appellant company requesting them to confirm the accounts as appearing ‘in their books and return the same after putting their signature and seal. The appellant has given signature and seal on the left hand bottom of the said letter. Thus it is clear that the document is a letter written by M/s Gee Ispat Pvt. Ltd. and the sa has been returned to them by the appellant after putting its signature and seal confirmation of the accounts. This shows that the document belonged to Gee Ispa and not to the appellant. Further this is a document which is confirming the accounts as appearing in the books of accounts of Gee Ispat.
3.9 The second document namely page 4 of Annexure A-l is a handwritten list of Share capital and loan. In the said list, the name “Esteem Textile” is appearing at serial no.6. No amount has been written nor is there any indication about the ownership of this document. In the absence of such clues, there is no reason to believe that the said document belonged to the appellant company. In fact it appears as though in the said document someone has made a list of shareholders who contributed share capital and list of parties who have given loan. There is no mention of this document in the assessment order. Further there are no evidences to show this document belonged to the appellant. The list appears to be the list of shareholders of M/s Gee Ispat Pvt. Ltd. and hence the said document could not be belonging to the appellant. Hence it has to be held that this document belonged to the party from whose premises it has been recovered and seized and not to the appellant.
3.10 The last of the 4 documents, namely page-28 of Annexure A-l is Computer printout of the list of shareholders giving-the-amount and the number of shares allotted. At Serial no.42, the name of the appellant company appears. Again, Rs. 5 lakhs has been mentioned as amount invested in the shares and 50,000/- has been mentioned as number of shares allotted. Once again there is no evidence to show that this particular document belonged to the appellant. Further, there is no dispute that the appellant had invested in the share capital of M/s Gee Ispat Pvt. Ltd. as noted in the satisfaction of note of the AO. In any case there are no reasons to hold that this document belonged to the appellant.
3.11 From the above discussion it is noted that the documents relied upon by the AO did not belong to the appellant at all. Further, there is no indication also that any of the contents of the documents related to any undisclosed income of the appellant company. These documents only showed that the appellant company had invested in the share capital to m/s Gee Ispat Pvt. Ltd. which is not in dispute.’ Considering, these factors it has to be held that there are no documents belonging to the assessee which has been seized from the premises of M/s Gee Ispat Pvt. Ltd. Therefore, to this extent, the submissions of the AR are liable to be accepted.”
10. On this aspect, the observations of the Hon’ble jurisdictional High Court in the case of RRJ Securities Ltd. (supra) at page nos. 33 and 36 are relevant and are reproduced below:
“33. The record slip belongs to the Assessee and, therefore, the action of the AO of the searched persons recording that the same belongs to the Assessee cannot be faulted. However, the question then arises is whether the AO of the Assessee was justified in taking further steps for reassessing the income of the Assessee in respect of the assessment years for which the assessments were concluded and in respect of which the seized document had no bearing. In our view, the same would be clearly impermissible as the seized material now available with the AO, admittedly, had no nexus with those assessments and was wholly irrelevant for the purpose of assessing the income of the Assessee for the years in question. Merely because a valuable article or document belonging to an Assessee is seized from the possession of a person searched under Section 132 of the Act, does not mean that the concluded assessments of the Assessee are necessarily to be re-opened under Section 153C of the Act. In our view, the concluded assessments cannot be interfered with mechanically and solely for the reason that a document belonging to the Assessee, which has no bearing on the assessments of the Assessee for the years preceding the search, was seized from the possession of the searched persons.
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11. Further in the case of Singhad Technical Education Society (Civil Appeal No.11080 of 2017) the Hon’ble Apex Court held that,-
“18) In this behalf, it was noted by the ITAT that as per the provisions of Section 153C of the Act, incriminating material which was seized had to pertain to the Assessment Years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four Assessment Years. Since this requirement under Section 153C of the Act is essential for assessment under that provision, it becomes a jurisdictional fact. We find this reasoning to be logical and valid, having regard to the provisions of Section 153C of the Act. Para 9 of the order of the ITAT reveals that the ITAT had scanned through the Satisfaction Note and the material which was disclosed therein was culled out and it showed that the same belongs to Assessment Year 2004-05 or thereafter. After taking note of the material in para 9 of the order, the position that emerges therefrom is discussed in para 10. It was specifically recorded that the counsel for the Department could not point out to the contrary. It is for this reason the High Court has also given its imprimatur to the aforesaid approach of the Tribunal. That apart, learned senior counsel appearing for the respondent, argued that notice in respect of Assessment Years 2000-01 and 2001-02 was even time barred.”
12. As rightly pointed out by the learned CIT(A) Exhibit A11 is the letter written by M/s Gee Ispat P. Ltd. and was returned by the assessee by putting their signature and seal in confirmation of the accounts, as such it belongs to Gee Ispat and not the assessee. So also the list of shareholders contained in Exhibit A1 and index sheet in Exhibit A8 cannot be said to belong to the assessee inasmuch as besides assessee there are so many names and it cannot be said that these documents belong to them. It would lead to some absurd conclusions or consequences to say that when a person maintains a list of their shareholders, such document belongs to or pertains to such shareholders also. We find no reason to disturb these findings of the learned CIT(A).
13. In view of the above factual and legal position, we are of the considered opinion that the findings of the learned CIT(A) on the aspect of the documents belonging to the assessee or the assumption of jurisdiction by the AO cannot be said to be either perverse or require any interference at the end of this Tribunal. We accordingly while upholding the same, find the grounds of appeal as devoid of merits.
14. In the result, appeal of the revenue is dismissed.