ITO Vs Kranti Impex Pvt. Ltd. (ITAT Mumbai)
Since the impugned seized papers are undated, have no acceptable narration and do not bear the signature of the assessee or any other party, they are in the nature of dumb documents having no evidentiary value and cannot be taken as a sole basis for determination of undisclosed income of the assessee. When dumb documents like the present loose sheets of papers are recovered and the Revenue wants to make use of it, the onus rests on the Revenue to collect cogent evidence to corroborate the noting therein. The Revenue has failed to corroborate the noting by bringing some cogent material on record to prove conclusively that the noting in the seized papers reveal the unaccounted on-money receipts of the assessee. Further, no circumstantial evidence in the form of any unaccounted cash, jewellery or investments outside the books of account was found in course of search in the case of assessee. Thus, the impugned addition was made by the AO on grossly inadequate material or rather no material at all and as such, deserves to be deleted. Hence, we are of the view that an assessment carried out in pursuance of search, no addition can be made simply on the basis of uncorroborated noting in loose papers found during search because the addition on account of alleged on-money receipts made simply on the basis of uncorroborated noting and scribbling on loose sheets of papers made by some unidentified person and having no evidentiary value, is unsustainable and bad-in-law.
FULL TEXT OF THE ITAT JUDGMENT
These cross appeals are arising out of the order of Commissioner of Income Tax (Appeals)-9, Mumbai, [in short CIT(A)] in appeal No. CIT(A)- 9/ITO-5(2)(2)/231/2010-1 1 dated 26.12.2012. The Assessment was framed by the Income Tax Officer, Ward- 5(2)(2), Mumbai (in short ITO) for the assessment year 2004-05 order dated 30-12-2010 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
2. The only issue in this appeal of Revenue is against the order of CIT(A) quashing the assessment completed under section 153C of the For this Revenue has raised the following grounds: –
“1. Whether, on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in annulling the assessment completed under section 153C of the IT Act, 1961?
The prays that the order of the Ld. CIT(A) be set aside and the order of the AO be restored. “
3. Briefly stated facts are that a search action under section 132 of the Act was conducted at the business and residential premises of one Bharat Shah Group of cases on 15-03-2008. During the course of search on Bharat Shah Group of cases certain loose papers marked as annexure A-1 consisting of 9 pages were seized and when confronted to the same to Bharat Shah Group of cases under section 132(4) of the Act on 08-05-2008, he stated that these papers were very old lying since 1985 and it is not known in whose handwriting it is written. These papers contains that the assessee is one of the party who has purchase three flats in the proposed building namely Sea View constructed by Bharat Shah Group of cases i.e. layer export Pvt. Ltd. During the course of assessment proceedings the AO confronted these loose paper No. 11 out of the loose papers folder 1 to 19 marked as annexure A-1 to explain the According to AO, there is recording of transactions relating to sale of flat in the legend project promoted by Layer Export Pvt. Ltd. to the assessee on 9th floor and 11thfloor. The AO also noted that according to this paper flat was also allotted to Mangalam Gems Pvt. Ltd. in Necklace view. The AO analyzing note from page No. 11 of Annexure A-1 noted that these transactions were made in FY 2003-04 for an area of 2,550 sq. at the rate of ₹ 15,450/- for 9th Floor, and ₹ 15,550/- for 11thFloor, which clearly establishes that builder has charged ₹ 100 per sq. ft. for higher floor rise and for 5 parking at ₹ 20 lacs. According to AO, the total consideration for both the flats came to ₹ 7.95 crores and after including parking came to ₹ 8,10,50,000/- which is bifurcated in cheque and cash. Cash came to ₹ 3,97,85,898/- at the rate of 1,98,92,949/- for each of the flat. According to AO, the builder has charged total cheque amount of ₹ 3.50 lacs and balance cash payment of ₹ 4,12,64,102/- out of these ₹ 4,12,64,102/- a sum of ₹ 2,06,32,051/- pertains to the assessee and balance 50% pertains to Mangalam Gems Pvt. Ltd. Accordingly, the AO added the cash payment amounting to ₹ 2,06,32,051/- as unexplained investment under section 69 of the Act. Before CIT(A), the assessee challenged the assessment that no satisfaction is recorded prior to the issue of notice under section 153C of the Act. According to assessee, notice under section 153C of the Act was issued on 06-09-201 0. Search was conducted on Bharat Shah Group of cases on 15-03-2008. The CIT(A) annulled the assessment by observing in Para 8.2 and 8.3 of the appellate order as under:-
“8.2. Having carefully and dispassionately considered all the aforesaid facts and circumstances and also the judicial pronouncements and the relevant provisions of sec, 153 C of the Act. Earn of the firm view that
(i) Satisfaction must be recorded by the Assessing officer of Bharat Shah or Bharat Shah group of cases that money, bullion, jewellery or other valuable article or thing or books of account or documents seized from the premises of Shri Bharat Shah or its group of cases during search operations belonged to the present appellant.
(ii) Such books of accounts or the documents or assets seized and belonging to the present appellant were required to be handed over to the present LAO before issuance of notice u/s.153 C of the Act in the present case.
8.3 No material nor any evidences were placed before me, neither by the appellant nor by the LAO, to prove that the aforesaid mandatory conditions were fulfilled in the present case. In view of the above and in the light of previously mentioned judicial decisions and in accordance with the provisions of sec.153C of the Act the assessment framed u/s 153C of the Act is annulled in this case. Therefore, ground of appeal no. 1 (2) is allowed.”
Aggrieved, now Revenue is in appeal before Tribunal.
4. On query from the Bench the learned Sr. Departmental Representative only referred to information sent by ACIT central Circle 24 & 26 Mumbai i.e. the AO of the searched person i.e. Bharat Shah Group of cases recording the satisfaction in regard to the assessee vide letter dated 21-12-2009 No. ACIT-24 & 26/information/2009-10, wherein it was stated as under:-
“Search operation u/s 132 was conducted on the premises of Bharat Shah group, in which loose papers I to 19, contained in annexure A – I, were seized from 55, Gamdevi 2nd Floor, Panchshil Plaza, Mumbai on 15.03.2008, copy of which are annexed herewith. These loose papers are systematic records related to actual sales transactions in Legend Project promoted by Layer Exports Pvt. Ltd. Mumbai on 15.3.2008. which are annexed herewith. These loose papers are systematic records related to actual sales transactions in Legend project promoted by Layer exports Pvt. Ltd, situated in walkeshwar, Malabar Hill, Mumbai-400 006. Most of the said papers contains details of flat numbers, flat size (total sold area), rate per sq. ft., total consideration bifurcated in cash and cheques, cash to be paid, cheques to be paid details of renegotiation, details of actual cash payment, details of actual cheques payment etc. In these loose papers sh” represent cash portion i.e. on money or out of books portion and “q” and “chq” represents cheques portion i.ewhich is accounted in the books. In this regard, on page No.11, there is recoding of transaction related to sales of flats by layer Exports Pvt. Ltd. to Kranti Impex Pvt. Ltd (PAN AACCK3044P), who is assessed in your charge. As per the said record, your assessee has paid cash money i.e. out of books money of ₹ 2,06,32,051 to my assessee. You are hereby requested to take necessary action in this regard as per provisions of IT act, 1961.”
5. When the learned Counsel for the assessee was confronted with this, he stated that exactly on identical facts the Tribunal in the case of ITO vs. Mangalam Gems Pvt. Ltd. in ITA No. 1640/M/2013 for AY 2004- 05 has confirmed the action of the CIT(A) quashing the assessment by observing as under: –
“7. We have carefully considered the rival submissions. Factually speaking, it is quite clear that the present proceedings have been initiated by the Assessing Officer on the strength of section 153C of the Act. It is also clear that the recourse to section 153C of the Act has been taken by the Assessing Officer based on the search action under section 132(1) of the Act, which had taken place in the case of Bharat Shah Group of cases. Before us, the Ld. Departmental Representative has referred to an information dated 21/12/2009 forwarded by the Assessing Officer of Bharat Shah Group of cases, which reads as under:-
“Sub:- Information in case of Kranti Impex Pvt. (PAN AA CCK 3044P)
Search operation under section. 132 was conducted on the premises of Bharat Shah group, in which loose papers 1 to 19, contained in annexure A-1, were seized from 55, Gamdevi 2nd Floor, Panchshil Plaza, Mumbai on 15/03/2008. Copy of which were annexed herewith. These loose papers are systematic records related to actual sales transactions in Legend project promoted by Layer Exports Pvt. Ltd. situated in Walkeshwar, Malabar Hill, Mumbai 400 006. Most of the said papers contains details of flat numbers, flat size(total sold area), rate per sq. ft. Total consideration bifurcated in cash and cheques, cash to be paid cheques to be paid, details of renegotiation, details of actual cash payment, details of actual cheques payment etc. In these loose papers represents cheque portion i.w. which is accounted in the books. In this regard, on page no.11, there is recording of transactions related to sales of flats by Layer Exports Pvt. Ltd. to Kranti Impex Pvt. Ltd. (PAN AACCK3044P), who is assessed in your charge. As per the said record, your assessee has paid cash money i.e. out of books money of Rs.2,06,32,051/- to my assessee. You are hereby requested to take necessary action in this regard as per provisions of IT Act, 1961.
Ostensibly, such information reflects that certain loose papers were found in the course of search in the premises of Bharat Shah Group, which inter-alia, contain record of sale transactions of M/s. Layer Exports Pvt. Ltd. The aforesaid information further reveals that in the recording of transaction relating to the sale of flats by M/s. Layer Exports Pvt. Ltd. to the assessee company, it showed that assessee had paid money out of books to the extent of Rs.2,06,32,051/-. On a plain reading of section 153C of the Act, as it stood at the relevant point of time, it is evident that the Assessing Officer of the searched person ought to be satisfied that, inter-alia, any money, bullion, jewellery or valuable article or books of account of documents seized or requisitioned belongs to a person other than the searched person. The phraseology of section 153C of the Act further prescribes that only after such satisfaction, the Assessing Officer of the searched person can hand over such documents to the Assessing Officer having jurisdiction of such other person. Furthermore, the Assessing Officer of such other person can issue a notice to that person to assess or reassess his income under section 153C of the Act only after such handing over from the Assessing Officer of the searched person. Be that as it may, coming to the facts of the present case, at the time of hearing the Ld. Departmental Representative also furnished a note dated 06/09/2010 prepared by the Assessing Officer of the instant assessee, which reads as under:-
“M/s. Layer Exports Pvt. Ltd. is one of the group companies of Bharat Shah, in whose case Search & Seizure action was conducted on 15.03.2008. Information has been received that M/s. Man galam Gems Pvt. Ltd. an assessee of this charge, has purchased property from Layer Exports Pvt. Ltd. and the payments towards the said property include cash elements also. In this regard copy of seized loose papers 1 to 19 has been forwarded in Annexure A-1 as evidence by the Asstt. CIT, Central Cir.24 & 26,Mumbai, vide letter No.ACIT-24 & 26/information/200910 dated 21.12.2009. The page No.11 of the seized loose paper specifically shows some figures of the transaction details of the assessee without dates, in coded word wherein “Q” represents cheque and “SF” represents cashThe total of such cash part as ascertained by the ACIT 24 & 26. Mumbai on the basis of this loose paper comes toRs. 2,06,32,05 1/-. Therefore, in view of the information available on record, the undersigned is satisfied that the documents seized relates to the assessee and that the purchase consideration of the properties involves cash elements, and that these are out of the books of the assessee and therefore such portion of income is to be brought to tax. Therefore, the undersigned is satisfied that this is a fit case for invoking the provisions of section 153C of the Income-tax Act and accordingly notice is being issued.
On the basis of the aforesaid, it is pointed out that the Assessing Officer has recorded the requisite satisfaction contemplated under section 153C of the Act prior to issuance of notice on 09/09/2010.
7.1 In this background, the aspect which is required to be examined is as to whether the CIT(A) is correct in holding that the conditions precedent for issuance of notice under section 153C of the Act have not been fulfilled. At the time of hearing, the Ld. Representative for the assessee had relied upon the judgment of the Hon’ble Delhi High Court in the case of CIT v. Pepsico India Holdings (P.) Ltd., 370 ITR 295(Del). In order to appreciate the legal position enunciated by the Hon’ble Delhi High Court in the case of Pepsico India Holdings (P.) Ltd. (supra), a reference be made to the expression “belongs” o “belong to” contained in section 153C of the Act. Notably, in order to cover the assessee under section 153C of the Act, the Assessing Officer of the searched person must be satisfied that the seized material i.e. money, bullion, jewellery, or other valuable article or things or books of account or documents does not belong to the person in respect of whom search was conducted. The Hon’ble Delhi High Court explained that in the context of section 153C of the Act, the expression “belongs to” cannobe equated to relates to” or “refers to”. By pointing out an illustration, the Hon ble Delhi High Court noted that the registered sale deed belongs to the purchaser of the property although it would relate to or refer to the vender also. According to th Hon’ble Delhi High Court, if pur haser’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, it was noted by the Hon’ble Delhi High Court, that if vendor’s premises are searched and copy of the sale deed is seized, it cannot be said that the c py “be ongs to” the purchaser just because it refers to him and he holds the original sale deed. In our considered opinion, the aforesaid legal position explained by the Hon’ble Delhi High Court in the context of section 153C of the Act is quite pertinent in the present case also.
7.2 In the present case, the information sent by the Assessing Officer of the searched person to the Assessing Officer of the assessee was based on certain notings on a loose paper found in the premises of Bharat Shah Group of cases. Quite clearly, even the Assessing Officer of the searched person, as manifested by the information sent to the instant Assessing Officer, which we have extracted above, does not conclude much less makes a FharUJHth t theWLI seKH OrRR“bHlongItIi tR1 assessee. There is no averment that loose papers do not belong to the searched person. In fact, even the satisfaction note canvassed by the Ld. Departmental Representative before us, which has been extracted above, does not say that the loose paper belong to a person other than the searched SerUonQt be$t, thEHoVlyLFhaWgKHLIadQ out 3s “ thJH the documents seized relate to the assessee and that purchase consideration of the properties involve FasVKLI eHOHPHQWiwATI $3s I agK, 3LI VouldJHLI pertinent to go back to the legal position explained by the Hon’ble Delhi High Court in the case of Pepsico India Holdings (P.) Ltd (supra), wherein it is KelO that thD eLI reKs3LI H“[SlateVVLoiQFanUotODe HquaDed to the ex ress3o “[SloHVs Loi wLI 3FhHf3nRs J mention in section 153C of the Act. Therefore, considering that Revenue has failed to establish that the documents in question do not belong to the searched person, the question of invoking of section 153C of the Act in the hands of the assessee company merely on the strength that the documents being related to it, cannot be justified.
7.3 Therefore, in view of the aforesaid discussion, we uphold the ultimate conclusion of the CIT(A) annulling the assessment, albeit on the ground that above discussed ingredients of section 153C of the Act have not been satisfied in this case.
