M/s. Flex International Pvt. Ltd., New Delhi V. DCIT, New Delhi

CO 308/DEL/2010

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9247 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 20 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 01-01-2014
• Assessment Year: 2000-2001
• Appeal Filed On: 10-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUDHA KUMARI
• Assessee Lawyers: SURESH ANANTHARAMAN
• Keywords: Search and seizure; Document seized; Validity of assessment; Documents seized
• Section: 143(3); 153A; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B NEW DELHI) BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.3720 TO 3723/DEL/2010 ASSESSMENT YEAR : 2000-01 TO 2004-05 DCIT, FLEX INTERNATIONAL PVT. LTD. CENTRAL CIRCLE-18, 305, 3 RD FLOOR, BHANOT CORNER, NEW DELHI. V. POMPOSH ENCLAVE, NEW DELHI. CROSS OBJECTION NOS. 308 TO 311/DEL/2010 IN I.T.A. NO.3720 TO 3723/DEL/2010 ASSESSMENT YEAR : 2000-01 TO 2004-05 FLEX INTERNATIONAL PVT. LTD. DCIT, 305, 3 RD FLOOR, BHANOT CORNER, CENTRAL CIRCLE-18, POMPOSH ENCLAVE, N. DELHI. V. NEW DELHI. (APPELLANT) (RESPONDENT) PAN PAN PAN PAN /GIR/NO. /GIR/NO. /GIR/NO. /GIR/NO.AAACF AAACF AAACF AAACF- -- -0250 0250 0250 0250- -- -E EE E DEPARTMENT BY : MS. SUDHA KUMARI, CIT-DR. ASSESSEE BY : SHRI SURESH ANANTHARAMAN, FCA. ORDER PER TS KAPOOR, AM: THESE ARE FOUR APPEALS FILED BY THE REVENUE AGAINST SEP ARATE ORDERS OF LD CIT(A) ALL DATED 3.5.2010. THE ASSESSEE HAS ALSO FILED CROSS OBJECTIONS TO THE APPEALS FOILED BY THE REVENUE I N ALL THE FOUR YEARS. SIMILAR GROUNDS OF APPEALS HAS BEEN TAKEN BY THE REVENUE AND SIMILAR GROUNDS IN CROSS OBJECTIONS HAS BEEN TAKEN BY THE ASSESSEE. FOR THE SAKE OF CONVENIENCE, THE GROUNDS OF APPEALS F OR ASSESSMENT YEAR 2000-01 AS WELL AS CROSS OBJECTIONS FOR ASSESSMENT YEAR 2000-01 ARE REPRODUCED BELOW:- ITA NO3720 TO 3723/DEL/2010 2 I.T.A. NO.3720/DEL/2010 (A.Y. 2000 I.T.A. NO.3720/DEL/2010 (A.Y. 2000 I.T.A. NO.3720/DEL/2010 (A.Y. 2000 I.T.A. NO.3720/DEL/2010 (A.Y. 2000- -- -01): 01): 01): 01): 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN LAW AND FACTS IN ANNULLING THE ASSESSMENT MADE U/S 153C. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN LAW AND FACTS BY HOLDING THAT THE SEIZED DOC UMENTS ON THE BASIS OF WHICH PROCEEDINGS U/S 153C WERE INITIATED DO OT BELONG TO THE ASSESSEE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN INTERPRETING SECTION 153A/153C OF THE INCOM E TAX ACT, 1961 . 4. THE ORDER OF CIT(A) IS ERRONEOUS AND NOT TENABLE IN L AW AND ON FACTS. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND AN Y/ALL OF THE GROUNDS OF APPEALS BEFORE OR DURING THE COURTS OF THE HEARING OF THE APPEAL. C.O. NO. 308/DEL/2010 C.O. NO. 308/DEL/2010 C.O. NO. 308/DEL/2010 C.O. NO. 308/DEL/2010: (A.Y. 2000 : (A.Y. 2000 : (A.Y. 2000 : (A.Y. 2000- -- -01): 01): 01): 01): 1. IT IS CONTENDED THAT THE PROVISIONS OF SECTION 153 A OF THE INCOME-TAX ACT, 1961 (THE ACT) ARE NOT APPLICABLE A T ALL AND THE ASSESSMENT ORDER PASSED U/ S 153C /143(3) OF THE ACT IS WIT HOUT JURISDICTION. 2. IT IS CONTENDED THAT NEITHER ANY SEARCH WAS INITIAT ED AGAINST THE ASSESSEE U/S 132(1) OF THE ACT, NOR ANY BOOKS OF ACCO UNTS, OTHER DOCUMENTS OR ANY OTHER ASSETS WERE REQUISITIONED U/ S 132A OF THE ACT AND HENCE THE ASSESSMENT MADE U/S 153C/ 153A OF THE ACT IS INVALID. 3. THE ORDER DATED 24.12.2007 PASSED U/S 153C READ WIT H SECTION 143(3) OF THE ACT IS WITHOUT JURISDICTION. ITA NO3720 TO 3723/DEL/2010 3 4. IT IS CONTENDED THAT THE ADDITIONS MADE IN THE ORD ER U/S 153C/ 153A OF THE ACT ARE NOT QUA SEARCH MATERIAL AND NEED TO BE DELETED. 5. THAT NO CORRESPONDING SEIZED MATERIAL WAS FOUND IN THE COURSE OF SEARCH FOR SUBJECT ADDITIONS AND THE RELEVANT INCOM E TAX RETURN FOR THE SAID ASSESSMENT YEAR WAS FILED PRIOR TO T HE SEARCH IN NORMAL COURSE SUO MOTO DISCLOSING THE PARTICULARS O F SUBJECT ADDITIONS, WHICH STOOD ACCEPTED U/ S 143(1) OF THE ACT . 6. THAT THE RETURNS HAVING BEEN ACCEPTED U/S 143(1) O F THE ACT, NO ASSESSMENT AS SUCH COULD BE SAID TO BE PENDING ON THE DATE OF INITIATION OF SEARCH AND HAVE ABATED IN THE LIGHT OF CONTEXTUAL AND HARMONIOUS READING OF SECOND PROVISO OF SECTION 15 3A( 1) OF THE ACT. 7. THAT THE ASSESSMENT AS CONTEMPLATED U/ S 153A OF THE ACT IS NOT A DENOVO ASSESSMENT AND ADDITIONS MADE THEREIN HAVE TO BE NECESSARILY RESTRICTED TO UNDISCLOSED INCOME UNEARTHE D DURING THE SEARCH. 8. THAT AS PER HON'BLE SUPREME COURT RULING IN THE C ASE OF MANISH MAHESHWARI, 289 ITR 341 (SC), PRESENT PROVISION OF SECTION 153A LEADING TO SIX YEARS ASSESSMENT, BEING DRAST IC IN CONSEQUENCE NEEDS TO BE INTERPRETED MOST STRICTLY AND WHENEVER POSSIBLE TO THE FAVOUR OF THE ASSESSEE. 9. THAT SINCE LONGEST ARM OF REVENUE, BEING SEARCH STAN DS EXERCISED IN PRESENT CASE, ASSESSMENT U/S 153C/ 153A OF THE ACT NEEDS TO BE MADE ON THE BASIS OF HIDDEN ASSETS/UNACCOUNTE D MONEY, INCRIMINATING MATERIAL, UNEARTHED DURING THE SEARCH. 10. THAT THE POWER OF REVIEW BEING NOT AVAILABLE TO SAME AUTHORITY, UNDER ACT IN NORMAL CIRCUMSTANCES, MUST/ S HOULD NOT BE ALLOWED IN PRESENT PROVISIONS OF SECTION 153C, OTH ERWISE IT ITA NO3720 TO 3723/DEL/2010 4 WOULD ALLOW ROVING AND FISHING ENQUIRIES IN SEARCH BASE D ASSESSMENT, WHICH IS NOT THE LEGISLATIVE INTENT. 11. THAT THE AFORESAID LEGAL POSITION STANDS ACCEPTED I N THE FOLLOWING ORDERS OF ITAT IN CONTEXT OF SECTION 153C/ 153A OF THE ASSESSMENT: (I) ANIL KUMAR BHATIA VS. ACIT, CENTRAL CIRCLE 17, NEW DELHI IN INCOME TAX ACT, 1961 NO.2660 TO 2665/DEL/2009. (II) JODHPUR BENCH OF ITAT RULING IN SUNCITY ALLOY S PVT. LTD. VS. ACIT, (2009) 124 TIJ 674. (III) KOLKATA BENCH OF IT AT RULING IN LMJ INTERNAT IONAL, 119 TIJ 214. 12. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN NOT DECIDING THE ISSUES (GROUNDS OF APPEAL) RAISED BY TH E APPELLANT ON THE MERITS OF THE CASE. 13) IT IS CONTENDED THAT THE SUM OF RS.5,53,752/- BEI NG THE COMMISSION . INCOME IS TAXABLE UNDER CHAPTER IV-D (IN COME FROM BUSINESS AND PROFESSION) OF THE ACT AND NOT UNDER CHAPTE R IV-F (INCOME FROM OTHER SOURCES) OF THE ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT DURING SEARCH AND SEIZURE OPERATIONS ON THE PREMISES OF SHRI MANVINDER SINGH, M/ S FLEX INDUSTRIES LTD. CERTAIN DOCUMENTS ALLEGED TO BE BELONG ING TO ASSESSEE WERE SEIZED. THE ASSESSING OFFICER INITIATED THE PROCEED INGS U/S 153C AND COMPLETED ASSESSMENTS AS PER PROVISIONS OF SECTION 153 A OF THE ACT. 3. DISSATISFIED WITH THE ADDITION, THE ASSESSEE FILED APP EALS BEFORE LD CIT(A) AND CHALLENGED THE VALIDITY OF ASSESSMENT U/S 153A BY TAKING AN ADDITIONAL GROUND ON LEGAL ISSUE AND SUBMITTED THAT PROCEEDINGS U/S 153C OF THE ACT WERE INITIATED ON THE BASIS OF CERTAI N DOCUMENTS WHICH DID NOT BELONG TO THE ASSESSEE. THEREFORE, THE PROCEEDI NGS ITSELF WERE ITA NO3720 TO 3723/DEL/2010 5 NOT LEGAL. THE LD CIT(A) ON THE BASIS OF THIS LEGAL GR OUND ANNULLED THE ASSESSMENT MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDE R:- THE PERUSAL OF THE SATISFACTION RECORD BEFORE ISSUING T HE NOTICE U/S 153C OF THE ACT MAKES IT CLEAR THAT THE DOCUMENTS CLAIMED AS BELONGING TO THE APPELLANT HAVE NOT BEEN DISCUSSED IN THE ASSESSMENT ORDER. THE ASSESSMENT ORDER REVEALS THAT A CURSORY REFERENCE HAS BEEN MADE TO CERTAIN DOCUMENTS SEIZED DU RING THE SEARCH AT THE PREMISES OF SHRI MANVINDER SINGH, FLEX I NDUSTRIES LTD, SHRI HARISH CHATURVEDI AND M/S ULTIMATE FLEX PA CK. 4. THEREAFTER RELYING UPON THE PROVISIONS OF SECTION 1 53C AND ON THE BASIS OF VARIOUS JUDICIAL PRONOUNCEMENTS, THE LD CI T(A) ANNULLED THE ASSESSMENT ORDERS BY HOLDING AS UNDER:- THE TERM BELONGING TO IMPLIES SOMETHING MORE THAN THE IDEA OF CASUAL ASSOCIATION. IT INVOLVES NOTION OF CONTINUIT Y AND INDICATES MORE OR LESS INTIMATE CONNECTION WITH THE PE RSON OVER A PERIOD OF TIME. THE EXPRESSION BELONGING TO THE ASSESSEE CONNOTED BOTH THE COMPLETE OWNERSHIP AND LIMITED OWN ERSHIP OF INTEREST. OF COURSE, BELONGING TO IS CAPABLE OF CONNOT ING INTEREST WHICH IS LESS THAN ABSOLUTE PERFECT LEGAL TITLE. HOWEVE R, THERE SHOULD BE SOME LIMITED OWNERSHIP OF INTEREST, IF IT IS T O BE PERMITTED THAT THE ASSETS BELONG TO THE ASSESSEE. IN THE I NSTANT CASE, THE DOCUMENTS SEIZED DURING THE SEARCH CANNOT BE TERMED TO BE INDICATING ANY LIMITED INTEREST OF THE OWNERSHI P OF THE APPELLANT IN SUCH DOCUMENTS. THIS IS CLEAR FROM THE FAC T THAT NO ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER ON THE BASIS OF THESE DOCUMENTS. THE LANGUAGE USED IN SECTION 153C OF T HE ACT IS MATERIALLY DIFFERENT FROM THE LANGUAGE USED IN SECT ION 158BD OF THE ACT. AS PER SECTION 1568 BD, IF ANY UNDISCLOSED INCOME RELATES TO OTHER PERSON, THEN ACTION AGAINST SUCH OTH ER PERSON CAN BE TAKEN PROVIDED SUCH UNDISCLOSED INCOME IS REFER ABLE TO ITA NO3720 TO 3723/DEL/2010 6 THE DOCUMENT SEIZED DURING THE SEARCH. HOWEVER, SECTIO N 153C OF THE ACT SAYS THAT IF VALUABLE OR BOOKS OF ACCOUNTS O R DOCUMENTS BELONGING TO SUCH OTHER PERSON ARE SEIZED THE N THE PROCEEDINGS U/S 153C OF THE ACT CAN BE INITIATED AGA INST SUCH OTHER PERSON. ON THE TOUCHSTONE OF THE RATIO LAID DO WN IN THE DECISIONS OF THE HON'BLE ITAT DISCUSSED IN EARLIER PARAS, IT IS HELD THAT THE DOCUMENTS SEIZED DO NOT BELONG TO THE APPELL ANT AND THE ASSESSING OFFICER WAS NOT JUSTIFIED IN INITIATING THE PROCEEDINGS U/S 153C READ WITH SECTION 153A OF THE ACT AND AS SUCH THE PROCEEDINGS INITIATED U/S 153C OF THE ACT ARE NOT AS PER THE LAW. THE ASSESSMENT MADE U/S 153A READ WITH SECTION 153C OF THE ACT CANNOT STAND OF ITS OWN AND HENCE THE SAME IS CANCELLED. 5. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 6. AT THE OUTSET, THE LD DR SUBMITTED THAT FINDINGS O F LD CIT(A) IS NOT BASED UPON THE FACTS OF THE CASE AS VARIOUS DOCUMEN TS BELONGING TO THE ASSESSEE WERE RECOVERED DURING SEARCH AND SEIZURE OPERATION AND REFERRED TO VARIOUS DOCUMENTS PLACED IN PAPER BO OK PAGES 356,396,496,537,374, 484, 557 & 362 AND IN VIEW OF THE ABOVE SUBMITTED THAT WITHOUT GOING INTO THE DOCUMENTS THE L D CIT(A) MADE THE FINDING THAT DOCUMENTS DID NOT BELONG TO THE ASSESSE E WHICH IS NOT AS PER FACTS OF THE PRESENT CASES AS ALL THESE DOCUMENTS BE LONG TO ASSESSEE. IN HIS REPLY, THE LD AR SUBMITTED THAT DOCUMENT S DID NOT BELONG TO THE PERIOD UNDER CONSIDERATION AND THEY BE LONGED TO PERIOD NOT COVERED BY THE ASSESSMENT YEAR WHICH WERE REOPENED AND THEREFORE LD CIT(A) HAS RIGHTLY ANNULLED THE ASSESSMENTS. HE FURTHER ARGUED THAT SATISFACTION WAS NOT RECORDED BY ASSESSING OF FICER AND THEREFORE INITIATION WAS INVALID AND RELIED UPON THE CASE LAW OF DSL PROPERTIES LTD. REPORTED AT 33 TAXMAN.COM 420. FURTH ER CONTINUING HIS ITA NO3720 TO 3723/DEL/2010 7 ARGUMENTS HE SUBMITTED THAT ADDITIONS WERE NOT MADE ON THE BASIS OF MATERIAL FOUND DURING SURVEY. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PAR TIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WHILE GOING THROUGH THE ASSESSMENT ORDER AND THAT OF LD CIT(A) WE OBSERVE THAT DOCUMENTS RECOVERED DURING THE SEARCH AND SEIZURE OPER ATION WERE NOT DISCUSSED BY THE ASSESSING OFFICER OR LD CIT(A) REGARD ING ITS NATURE AND BELONGINGNESS. THE LD CIT(A) DID NOT MAKE ANY FI NDING AS TO WHETHER THE DOCUMENTS BELONGED TO ASSESSEE OR NOT AND SI MPLY CANCELLED THE ASSESSMENT HOLDING THAT DOCUMENTS DID NO T BELONG TO ASSESSEE AS THE ASSESSING OFFICER HAD NOT MADE ANY ADDITION ON THE BASIS OF THESE DOCUMENTS. IN OUR CONSIDERED OPINION., SEC TION 153C IS TRIGGERED WHEN THE DOCUMENTS OR ANY MONEY OR BULLIO N BELONGING TO ANOTHER PERSON IS RECOVERED FROM THE PREMISES OF PERSON SEARCHED AND ASSESSMENT HAS TO BE MADE AS PER THE PROVISIONS OF THE SEC TION 153A OF THE ACT. THE ASSESSING OFFICER HAS REFERRED TO A NUMB ER OF DOCUMENTS WHICH WERE RECOVERED DURING SEARCH AND SEIZU RE OPERATIONS BUT HAS NOT MENTIONED THE NATURE OF DOCUMENTS. THE L D CIT(A) HAS CANCELLED THE ASSESSMENTS HOLDING THAT DOCUMENTS DID NOT BELONG TO ASSESSEE. HOWEVER, DOCUMENTS AS POINTED OUT BY LD DR CLEA RLY INDICATES THAT THEY BELONG TO ASSESSEE. THESE DOCUMENTS AR E PART OF ANNEXURE A-35, A-37 & A-38 AS MENTIONED BY ASSESSING OFF ICER AS BEING PART OF DOCUMENTS FOUND DURING SEARCH OPERATION S. THEREFORE, THE ACTION OF LD CIT(A) IN ANNULLING THE ASSESSMENTS I N OT CORRECT AND IS NOT AS PER LAW. THEREFORE, WE SET ASIDE THE ORDERS OF T HE LD CIT(A) AND REMIT THE SAME BACK TO THE OFFICE OF LD CIT(A) WHO W OULD RE-ADJUDICATE THE SAME IN ACCORDANCE WITH LAW AFTER PROVIDING REASO NABLE OPPORTUNITY TO ASSESSEE. THEREFORE, THE APPEALS FILED BY REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ITA NO3720 TO 3723/DEL/2010 8 8. THE CROSS OBJECTIONS FILED BY ASSESSEE BECOMES INFRUCTUO US AS WE HAVE SET ASIDE THE ORDER OF LD CIT(A) AND HENCE TH EY ARE DISMISSED. THE ASSESSEE WILL BE AT LIBERTY TO PLEAD ITS CASE BEFORE LD CIT(A). 9. IN VIEW OF THE ABOVE, THE APPEALS OF REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES WHEREAS CROSS OBJECTIONS OF ASSESSEE ARE DISMISSED. 10. ORDER PRONOUNCED IN THE OPEN COURT ON 31ST DAY O F JANUARY, 2014. SD/- SD/- (R.P. TOLANI) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT.31.1.2014. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING 2.1.2014 DATE OF DICTATION 20.1.2014 DATE OF TYPING 21/1/2014 DATE OF ORDER SIGNED BY 31.1.2014 BOTH THE MEMBERS & PRONOUNCEMENT. DATE OF ORDER UPLOADED ON NET & SENT TO THE BENCH CONCERNED. ITA NO3720 TO 3723/DEL/2010 9