Case Law Details
Shree Radhey Technologies (P) Ltd. Vs ACIT (ITAT Delhi)
In the instant case the books of account or documents did not belong to the assessee and therefore, the AO was not justified in initiating action against the assessee under section 153A read with section 153C. The hand written paper i.e. page no. 35 does not fall within the meaning of books of accounts or document and does not belong to the assessee, hence, the proceedings U/s 153C would not have been invoked against the assessee.
FULL TEXT OF THE ITAT JUDGMENT
This appeal has been filed by the assessee against the order dated 11/03/2013 passed by CIT(A)-XXXIII, New Delhi.
2. The grounds of appeal are as under:-
1. On the facts and in the circumstances of the case and in law the Ld. CIT(A)-33 has erred by confirming the action U/S 153C of the Income Tax Act, 1961 against the appellant in the absence of seizure of any valuable article or thing or books of accounts or documents during search at the premises of M/S Surya properties.
2. That Ld. CIT(A)-33 has erred by confirming the addition of Rs. 2,00,000/- as undisclosed income of the appellant on the basis of a loose paper seized during search at the premises of MIS. Surya Properties without appreciating the facts of the case in proper perspective. The Ld. CIT(A)-33 failed to appreciate the fact that no evidence direct or corroborative for the additional income was found, no cognizance of the assessment orders of other investors noted on that loose paper was taken and also no opportunity for cross examination of the searched party was extended.
3. The assessee is a Pvt. Ltd. Company engaged in the business of real estate. “However, during the year under consideration, no such activity has been shown by the assessee. The Asstt. Commissioner of Income Tax, Central Circle- 14, New Delhi, vide his office letter no. ACITICC-14I2008-09I247 dated 23-09- 2008 has forwarded a Satisfaction Note wherein he has informed that a search and seizure operation was carried out at the residential premises of Sh. Narender Kumar of Surya Properties at 5128, Chiranjiv Vihar, Ghaziabad on 22-09-2005. Documents marked as Annexure A-l to A-23 were seized during the search. He has also recorded in his satisfaction that Pages 35 to 56 of Annexure A-9 belong to this assessee i.e. MIs Shree Radhey Technologies Pvt. Ltd… Accordingly, the case of the Assessee Company required to be assessed as per the provisions of Section 1 53C of the Income Tax Act, 1961. After receiving the copies of the material, same was examined and it was found that these documents actually belong to the assessee i.e. MIs Shree Radhey Technologies Pvt. Ltd… Based on this, undersigned, vide order sheet entry dated 25-09-2008 independently recorded the satisfaction and, accordingly, Notice uj’s 1 53C of the Income Tax Act. 1961 was issued to the assessee on 7-11-2008 & 25-09-2008 respectively for A. Y. 05-06-& 06-0 7. In response to the same, the assessee filed his return of income on 20-10-2008 declaring a loss of Rs.3, 2401-, for A.Y. 05-06 & on 19-11- 2008 declaring a loss of Rs. 35,130/- forA. Y. 06-07.
3. The assessee is a Private Limited Company engaged in the business of real estate. However, during the year under consideration, no such activity has been shown by the assessee. The ACIT, Central Circle-14, New Delhi vide letter dated 23.09.2008 forwarded a Satisfaction Note wherein he informed that a search seizure operation was carried out at the residential premises of Sh. Narender Kumar of Surya Properties at 5/28, Chiranjiv Vihar, Ghaziabad on 22.09.2005. Documents marked as Annexure A-1 to A-23 were seized during the search. He also recorded in his satisfaction that Pages 35 to 56 of Annexure 1-9 belong to this assessee i.e. M/s. Shree Radhey Technologies Pvt. Ltd. Accordingly, the case of the Assessee company was assessed as per the provisions of Section 153C of the Income Tax Act, 1961. After receiving the copies of the material, same was examined and it was found that these documents actually belong to the assessee i.e. M/s. Shree Radhey Technologies Pvt. Ltd. based on this, vide order sheet entry dated 25.09.2008 independently recorded the satisfaction and accordingly, Notice u/s 153C of the Income Tax Act, 1961 was issued to the assessee on 07.11.2008 & 25.09.2008 respectively for A.Y. 2005-06 and 2006-07. In response to the same, the assessee filed his return of income on 20.10.2008 declaring a loss of Rs.3,240/- for A.Y. 2005-06 and on 19.11.2008 declaring a loss of Rs.35,130/- for A.Y. 2006-07. The Assessing Officer held that the contents of page 35 are actual transactions and the amounts mentioned thereon were the sale consideration received by the assessee. Out of the said sale consideration, the assessee has not accounted for an amount of Rs. 1,22,50,000/- and accordingly held the same as undisclosed income of the assessee and added the same to the income of the assessee.
4. Being aggrieved by the assessment order, the assessee field appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
5. The Ld. AR submitted that documents seized from the searched party must belong to the third party. In P. Srinivas Naik vs. ACIT CC (2), 117 ITD 201 (Bangalore), the ITAT has elaborately explained the meaning of ‘belong to’ ‘belonging’ implies something more than the idea of a casual association. It involves the notion of continuity and indicates one more or less intimate connection with the person over a period of time. The books of accounts or documents seized during the course of search had a close association with the It did not record the transaction carried out by the assessee. Under the W.T. Act, 1957 assets belonging to the assessee were taxable. The expression ‘belonging to the assessee’ connotes both the complete ownership and limited ownership and limited ownership of interest. Of course, belonging to is capable of connoting interest which is less than an absolute perfect legal title. However, there should be some limited ownership of interest, if it is to be permitted that the assets belongs to the assessee. In the instant case, documents or books of account found during the course of search and seized could not be termed to be indicating any limited interest of the ownership of the assessee in such books of account or documents. As per Section 158BD, if any undisclosed income relates to other person, then action against such other person can be taken provided such undisclosed income is referable to the documents seized during the course of search. However, section 1 53C says if valuable or books of account or documents belonging to the other persons are seized than action under said section can be taken against that person. In the instant case the books of account or documents did not belong to the assessee and therefore, the AO was not justified in initiating action against him under section 1 53A read with section 153C. Therefore, the hand written paper i.e. page no. 35 does not fall within the meaning of books of accounts or document and does not belong to the assessee, hence, the proceedings U/s 153C would not have been invoked against the assessee. A taxing statute, as is well known must be construed strictly. In Sneh Enterprises V. Commissioner of Customs (2006)7 SCC 714, 721, it was held while dealing with a taxing provisions, the principle of strict interpretation should be applied. The court shall not interpret the statutory provision in such a manner which would create an additional fiscal burden on a person. It would never be done by invoking the provisions of another act possible; the court ordinarily would interpret the provisions in favour of a taxpayer and against the revenue. The Ld. AR relied upon the decision of the Hon’ble Delhi High Court in case of CIT vs. Renu Constructions Pvt. Ltd. (ITA No.499/2011 dated 06.09.20 17) wherein it is held that the seized documents should belong to a person other than the person referred to in Section 1 53A of the Act and in the present case the seized documents itself does not belong to the assessee which can be seen from the records. The Assessing Officer has also not proved that the document belong to the assessee. Therefore, the action under Section 1 53C of the Income Tax Act, 1961 against the assesee in the absence of seizure of any valuable article or thing or books of accounts or documents during search at the premises of M/S Surya properties itself is bad in law.
6. The Ld. DR relied upon the order of the Assessing Officer and order of the CIT(A). The Ld. DR relied upon the decisions of the Hon’ble Delhi High Court in cases of PCIT vs. Super Malls Pvt. Ltd. 393 ITR 557, PCIT vs. Nau Nidh Overseas Pvt. Ltd. 394 ITR 753 and Ganpati Fincap Services (P.) Ltd. vs. CIT 82 com408 as well as PCIT vs. Sheetal International Pvt. Ltd. 2017-TIOL-1355-HC-DEL-IT) and PCIT vs. Instronics Ltd. 82 taxmann.com 257.
7. We have heard both the parties and perused the records. It is pertinenet to note that the documents which were seized by the Revenue at the premises of M/s Surya Properties in the said documents nowhere mentioned the said belongs to the assessee. The assessee at every stage of the Assessment Proceedings denied that the said document belongs to the assessee. In fact, the document which is heavily relied upon by the Assessing Officer and the CIT(A) has not at all having any title of the assessee or the signature of the assessee or signature of the employees of the assessee. This fact was never disputed by the Assessing Officer at any stage of Assessment Proceedings. Merely on the presumption that Pages 36 to 56 of the annexure A-9 gives credence to the fact that these are investments made by the persons as pages 38 to 44 and 50 to 56 are copies of agreements between Shree Radhe Technologies Pvt. Ltd. and Sh. Jag Mohan Nayyar and each of these pages bears the signatures of the authorized signatory of the assessee company does not conclude that the said page in handwritten notes of the calculations which do not have any signature belongs to the assessee. The Ld. DR relied upon the decisions of the Hon’ble Delhi High Court wherein the facts are totally different from the present case. In the present case the assessee at every stage of the Assessment Proceedings through reply demonstrated that the said documents do not belong to the assessee. The said submissions was not taken into consideration in consonance with the documents before the Assessing Authorities. The reliance of the Ld. AR on the decisions of the Hon’ble Delhi High Court in case of Renu Constructions (Supra) is relevant and applicable in the present case. The Hon’ble Delhi High Court held as under:
“6. Mr. Manchanda, learned Senior Standing Counsel appearing for the Revenue, places reliance on decisions of the this Court in Principal Commissioner of Income Tax v. Super Malls Pvt. Ltd., [2017] 393 ITR 557, Principal Commissioner of Income Tax Central Circle-II v. Satkar Fincap Ltd. [2017] 393 ITR 378 and Principal Commissioner of Income Tax (Central-2) v. Nau Nidh Overseas Pvt. Ltd. [2017] 394 ITR 753 (Delhi) to urge that, notwithstanding the fact that the search in the present case took place prior to the amendment to Section 153C of the Act with effect from 1st June 2015, it is sufficient for the purpose of initiation of proceedings under Section 153C of Act, that the seized documents pertained to the Assessee and did not have to be shown at that stage to be belonging to the Assessee.
7. Learned counsel for the Respondents-Assessees, on the other hand, pointed out that this Court has, in Principal Commissioner of Income Tax (Central-2) v. Vinita Chaurasia [2017] 394 ITR 758 (Del), after considering the aforementioned three decisions, reiterated the settled legal position as explained in Pepsico India Holdings P. Ltd. v. ACIT [2015] 370 ITR 295 (Del), that for the purpose of initiating proceedings under Section 1 53C of the Act, the seized documents had to be shown to belong to the other person and not merely pertaining to such other person. The change brought about in this regard in Section 153 C of the Act by way of amendment has been given prospective effect from 1st June 2015. The amended provision therefore has no application to the cases on hand.
8. The recent decision of the Supreme Court in Commissioner of Income Tax, Pune v. Sinhgad Technical Education Society [2017] 84 com290 (SC) settles the legal position in favour of the Assessees. The Supreme Court, while affirming the judgment of the Bombay High Court, approved the decision of the Gujarat High Court in Kamleshbhai Dharamshibhai Patel v. Commissioner of Income Tax-III, (2013) 263 CTR (Guj) 362 that a document seized ‘should belong to a person other than the person referred to in Section 1 53A of the Act’. It has been categorically observed by the Supreme Court that the above position of law laid down by the Gujarat High Court is correct.
9. Consequently, this Court rejects the contention of the learned counsel for the Revenue that even prior to 1st June 2015 at the stage of initiation of proceedings under Section 153C of the Act, it is sufficient if the seized document ‘pertained to’ the other person and it is not necessary to show that the seized material ‘belonged to’ the other person. This legal position has been explained by this Court in its recent decision dated 10th July 2017 in P. (C) No. 3241/2015 (Canyon Financial Services Ltd. v. Income Tax Officer).
10. As far as ITA No. 499/2011 is concerned, the Court finds that there is an additional ground to reject the appeal of the Revenue. The satisfaction note recorded by the AO in that case does not even refer to the seized documents.
11. For the aforementioned reasons, Question No. 2 framed by the Court is answered in the negative, i.e. in favour of the Assessees and against the Revenue.
12. Consequently, Question No. 1 in ITA Nos. 499 of 2011 and ITA Nos. 32 and 35 of 2012 is answered in the affirmative, i.e. in favour of the Assessees and against the Revenue. In so far as the Revenue has been unable to show that the impugned order of the ITAT is perverse, Question No. 3 is answered in the negative, i.e. in favour of the Assessee and against the Revenue. The solitary question framed in ITA Nos. 41 and 1265 of 2017 is answered in the affirmative i.e. in favour of the Assessee and against the Revenue.
13. The appeals are accordingly dismissed.”
In the instant case the books of account or documents did not belong to the assessee and therefore, the AO was not justified in initiating action against the assessee under section 153A read with section 153C. The hand written paper i.e. page no. 35 does not fall within the meaning of books of accounts or document and does not belong to the assessee, hence, the proceedings U/s 153C would not have been invoked against the assessee. Thus, the assessee has established before the Assessing Officer as well as the CIT(A) that the document does not belong to the assessee. The issue herein is squarely covered by the decision of the Hon’ble Delhi High Court in Renu Constructions (Supra), therefore, the order of the CIT(A) is set aside and appeal of the assessee is allowed. For A.Y. 2006-07 the issue contested by the Assessee is also similar therefore, the ITA No. 3228/Del/2013 is also allowed
8. In result, both the appeals of the assessee are allowed.
Order pronounced in the Open Court on 06th April, 2018.
