Brief of the case:
In the case of ACIT Vs. Shivaansh Advertising & Publications Pvt. Ltd. Delhi Bench of ITAT observed the requirements of section 153C provides for taking recourse to assessment in respect of any other person and held the conditions precedent are :
(i) Satisfaction must be recorded by the AO that any undisclosed income belongs to any person, other than the person with respect to whom search was made under s. 132;
(ii) The books of account or other documents or assets seized or requisitioned had been handed over to the AO having jurisdiction over such other person; and
(iii) The AO has proceeded under s. 153C against such other person.
The conditions precedent for invoking the provisions of s. 153C, thus, are required to be satisfied before the provisions of said section are applied in relation to any person other than the person whose premises had been searched or whose documents and other assets had been requisitioned under s. 132A.
Facts of the case:
- A search and seizure action u/s 132 was carried out in the cases of Shri B.K. Dhingra, Smt. Poonam Dhingra and M/s Madhusudan Buildcon Pvt. Ltd on 20.10.2008.
- During the course of search at their residential premises certain documents belonging to the assessee, who is an individual and proprietor of a concern were seized.
- On the basis of documents seized proceedings were initiated in the case of the assessee u/s 153C read with section 153A of the Act.
- In response to the notice u/s 153C, the assessee filed a return for assessment year 2003-04 on 06.09.2010 declaring ‘Nil’ income.
- AO found that the assessee company belonged to the Thapar Group of cases and one of the main allegations against the group was that several concerns had been floated by the group with dummy Directors and shareholders.
- Notice u/s 153C was issued to the assessee and satisfaction was recorded to initiate proceedings u/s 153C.
- During assessment proceedings u/s 153C AO found that the assessee had declared a closing stock of Rs.8,94,32,924/- as on 31.03.2002, which formed the opening stock for the previous year under consideration.
- Further AO found that the assessee had purchased textile goods of Rs.21,15,780/- and had made sales of Rs.26,54,875/-.
- AO asked assessee to prove its trading activities and to produce sale tax records and to give break up of cash or cheque purchases.
- AO further found that the director/shareholder was not a man of means and the premises were not commercial premises.
- It was reported by the investigation wing that no evidence of stock was found from any other premises of the Thapar Homes Group.
- The AO observed that in the case of assessee, all the purchases & sales were in cash. The items purchased & sold were textile & fabrics.
- AO observed that the assessee was not dealing in branded items and there was no name of any company in these products.
- AO found that in inventories of Fabric & Textile Goods shown in the balance sheet, the closing stock of last year stood at Rs.8,94,32,924/- and this year the figure was Rs.8,93,30,132/- which was almost the same.
- AO observed that the purchases & sales were only out of current year transactions which were held unverifiable and bogus.
- AO observed that the preponderance of probability suggested that the stocks were not genuine but since these were declared prior to 01.04.2002, no action was being taken for now.
- AO held that all cash purchases were held unverifiable and hence a sum of Rs.21,15,780/- was disallowed u/s 69C.
- AO further observed that the expenses claimed by the assessee company in P&L account were also unverifiable as such 100% of the expenses i.e. Rs.4,43,240/- were disallowed.
- Against the additions made, assessee preferred appeal before CIT (A) who allowed appeal in part. Both AO as well as assessee filed appeal before ITAT.
- AO against the deletion of additions and assessee came in CO with ground challenging assessment proceedings u/s 153C.
Contention of the revenue:
