Kaivallya Entertainment Pvt Ltd., CHENNAI V. DCIT, CHENNAI

ITA 1148/CHNY/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3970 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 15-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RANGARAJ
• Assessee Lawyers: V JAGADISAN
• Keywords: Document seized; Documents seized
• Section: 143(3); 153A; 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A, CHENNAI , ! . '# , $ %& ' BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ITA NO.1148/MDS/2015 $ ( )( / ASSESSMENT YEAR : 2008-09 KAIVALLYA ENTERTAINMENT PVT. LTD., NO.65/216, SRIRAMBHAVANAM, ALWARPET, CHENNAI 600 018. [PAN: AADCK 0637K] VS. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-III(1), CHENNAI. ( /APPELLANT ) ( / RESPONDENT ) *+ - . / APPELLANT BY : SHRI V.JAGADISAN, ADVOCATE /0*+ - . / RESPONDENT BY : SHRI RANGARAJ, CIT - 1 / DATE OF HEARING : 12.07.2017 2) - 1 / DATE OF PRONOUNCEMENT : 27.07.2017 /ORDER PER SANJAY ARORA, AM : THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-19, CHENNAI ( CIT(A) FOR SHORT) DATED 30.01.2015, DISMISSING THE ASSESSEES APPEAL CONTES TING ITS ASSESSMENT U/S. 143(3) R/W S. 153A OF THE INCOME TAX ACT, 1961 (TH E ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (AY) 2008-09 VIDE ORDER DATED 31.12 .2013. 2 ITA NO.1148/MDS/2015 (AY 2008-09) KAIVALLYA ENTERTAINMENT PVT. LTD . V. DY. CIT 2. THE ONLY ISSUE AGITATED BEFORE US BY THE ASSESSE E IS THE VALIDITY IN LAW, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, OF THE ASS UMPTION OF JURISDICTION U/S.153C OF THE ACT, WHICH READS AS UNDER: ASSESSMENT OF INCOME OF ANY OTHER PERSON. 153C. NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 139, SECTION 147, SECTION 148, SECTION 149, SECTION 151 AND SECTION 1 53, WHERE THE ASSESSING OFFICER IS SATISFIED THAT ANY MONEY, BULLION, JEWEL LERY OR OTHER VALUABLE ARTICLE OR THING, SEIZED OR REQUISITIONED, BELONGS OR BELONG TO A PERSON OTHER THAN THE PERSON REFERRED TO IN SECTION 153A, THEN T HE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED SHALL B E HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTH ER PERSON AND THAT ASSESSING OFFICER SHALL PROCEED AGAINST EACH SUCH O THER PERSON AND ISSUE SUCH OTHER PERSON NOTICE AND ASSESS OR REASSESS INC OME OF THE OTHER PERSON IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A; PROVIDED (2) WHERE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS S EIZED OR REQUISITIONED AS REFERRED TO IN SUB-SECTION (1) HAS OR HAVE BEEN RECEIVED BY THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON AFTER THE DUE DATE FOR FURNISHING THE RETURN OF INCOME FOR THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SEARCH IS CONDUCTED UNDER SE CTION 132 OR REQUISITION IS MADE UNDER SECTION 132A AND IN RESPECT OF SUCH A SSESSMENT YEAR (A) NO RETURN OF INCOME HAS BEEN FURNISHED BY SUCH OTHER PERSON AND NO NOTICE UNDER SUB-SECTION (1) OF SECTION 142 HAS BEEN ISSUED TO HIM, OR (B) A RETURN OF INCOME HAS BEEN FURNISHED BY SUCH O THER PERSON BUT NO NOTICE UNDER SUB-SECTION (2) OF SECTION 143 HAS BEEN SERVED AND LIMITATION OF SERVING THE NOTICE UNDER SUB-SECT ION (2) OF SECTION 143 HAS EXPIRED, OR (C) ASSESSMENT OR REASSESSMENT, IF ANY, HAS BEEN MA DE, BEFORE THE DATE OF RECEIVING THE BOOKS OF ACCOUNT O R DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED BY THE ASSESSING OFFICER HA VING JURISDICTION OVER SUCH OTHER PERSON, SUCH ASSESSING OFFICER SHALL ISS UE THE NOTICE AND ASSESS OR REASSESS TOTAL INCOME OF SUCH OTHER PERSON OF SU CH ASSESSMENT YEAR IN THE MANNER PROVIDED IN SECTION 153A. 3. OPENING THE ARGUMENTS FOR AND ON BEHALF OF THE A SSESSEE, IT WAS SUBMITTED BY THE LD. AUTHORIZED REPRESENTATIVE (AR), THE ASSE SSEES COUNSEL, THAT THERE WAS NO SEIZED MATERIAL FOUND DURING THE SEARCH U/S. 132 OF THE ACT IN THE CASE OF 3 ITA NO.1148/MDS/2015 (AY 2008-09) KAIVALLYA ENTERTAINMENT PVT. LTD . V. DY. CIT VISHWAKARMA MINES & BUILDING MATERIALS PVT. LTD. (V MPL) ON 21.06.2011 HAVING A BEARING ON THE DETERMINATION OF TOTAL INCO ME OF THE ASSESSEE. THIS IS AS ONLY A COPY OF THE ASSESSEES AUDITED FINAL ACCOUNT S, I.E., BALANCE SHEET AND ANNEXURES THERETO, WERE FOUND DURING SEARCH AND SUB JECT TO SEIZURE. THE SAME STAND ALREADY FURNISHED AS A PART OF THE ASSESSEES RETURN OF INCOME FILED ON 30.09.2008 AND SUBJECT TO ASSESSMENT U/S. 143(3) VI DE ORDER DATED 13.12.2010 (COPY ON RECORD). THERE IS NO REFERENCE TO ANY SEIZ ED MATERIAL IN THE ASSESSMENT ORDER NOR IS ANY ADDITION BASED THEREON, WHICH (ASS ESSMENT) IS DE HORS THE SEIZED MATERIAL, BEING ONLY THE ASSESSEES FINAL ACCOUNTS. THE NOTICE U/S. 153C ISSUED ON 18.06.2013 IS THUS BAD IN LAW. 4. DURING HEARING, THE BENCH, ON A PRELIMINARY EXAM INATION OF THE SEIZED MATERIAL, CALLED FOR FROM THE LD. DEPARTMENTAL REPR ESENTATIVE (DR) ON AN EARLIER OCCASION (27.12.2016), THE SEIZED FINAL ACCOUNTS WE RE FOUND TO BE IN FULL AGREEMENT WITH THAT CLAIMED AS FILED ALONG WITH THE RETURN, COPY OF WHICH WAS ADDUCED, FOR EXAMINATION, BY THE LD. AR. THERE COUL D THUS, I.E., WITHOUT ANYTHING MANNER, BE NO SATISFACTION AS TO THE SAME HAVING A BEARING ON THE TOTAL INCOME OF THE ASSESSEE. HOWEVER, AS THE SATISFACTIO N NOTE BY THE ASSESSING OFFICER (AO), ALSO PERUSED THEREAT, REFERRED TO DIF FERENT ANNEXURES AND IN-AS- MUCH AS THERE COULD ALSO BE SOME DIFFERENCES, WHICH WOULD REQUIRE COMPARING THE TWO DOCUMENTS IN DETAIL, THE MATTER WAS POSTED FOR HEARING ON 12.07.2017, WITH THE FOLLOWING DIRECTION VIDE ORDER SHEET ENTRY DATED 11.07.2017: THE LD. DR PROVIDES THE SEIZED DOCUMENTS/MATERIAL. THE FOLDER WAS GONE THROUGH BY THE BENCH. HE WAS FURTHER DIRECTED TO SP ECIFY THE SEIZED MATERIAL RELIED UPON BY THE AO IN ARRIVING AT HIS SATISFACTI ON WITH REGARD TO THE IMPUGNED ASSESSMENT, ALSO FURNISHING THE SATISFACTI ON NOTE. ADJOURNED FOR THE PURPOSE TO 12.07.2017. BOTH PARTIES INFORMED. THE FOLLOWING TABLE OF THE SEIZED MATERIAL WAS FUR NISHED BY THE LD. DEPARTMENTAL REPRESENTATIVE (DR), ALONG WITH THE SA TISFACTION NOTE, ON THE FOLLOWING DATE: 4 ITA NO.1148/MDS/2015 (AY 2008-09) KAIVALLYA ENTERTAINMENT PVT. LTD . V. DY. CIT PAGE NO 131 TRIAL BALANCE FOR THE PERIOD 1.4.2007 TO 31 .3.2008 PERTAINS TO KAIVALLYA ENTERTAINMENT PVT. LTD. PAGE NO 132 PROFIT & LOSS ACCOUNT FOR THE PERIOD ENDED 31.3.2008 PERTAINS TO KAIVALLYA ENTERTAINMENT PVT. LTD. PAGE NO 133 BALANCE SHEET AS ON 31.3.2008 PERTAINS TO KAIVALLYA ENTERTAINMENT PVT. LTD. THE SATISFACTION NOTE, ENCLOSED ALONG WITH, READS AS UNDER: M/S. KAIVALLYA ENTERTAINMENT PVT. LTD. PAN: AAD CK 0637K A.Y.: 2008-09 DURING THE COURSE OF SEARCH IN THE CASE OF M/S. VIS HWAKARMA MINES & BUILDING MATERIALS PVT. LTD. (VISHWAKARMA GROUP) ON 21-06-2011 THE FOLLOWING DOCUMENTS BELONGING TO 'M/S. KAIVALLYA EN TERTAINMENT PVT. LTD. WERE SEIZED FROM THE PREMISES OF M/S. VISHWAKARMA M INES & BUILDING MATERIALS PVT. LTD.: DOCUMENTS BELONGING TO M/S. KAIVALLYA ENTERTAINMENT PVT. LTD. WERE SEIZED VIDE ANN/SSK/LS/S-1 (FINAL A/CS OF F.Y.08-09 TO 10-11). IN VIEW OF THE ABOVE, I AM SATISFIED THAT THE CASE OF M/S. KAIVALLYA ENTERTAINMENT PVT. LTD. IS LIABLE TO BE ASSESSED U/ S 153C. NOTICE U/S. 153C ISSUED. SD/- (S.MOHD MUSTAFA) DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE III (1), CHENNAI NOTICE U/S. 153C R/W S. 153A SERVED ON 16/08/13 BY POST ACK. FILED IN 2012-13 FOLDER. CLEARLY, THERE IS, FIRSTLY, NO DOCUMENT APART FROM THE FINAL ACCOUNTS (FOR THE RELEVANT YEARS), INCLUDING THE RELEVANT PREVIOUS YE AR, I.E., F.Y. 2007-08 (EVEN THOUGH THE NOTE REFERS TO THE YEARS AS FY 2008-09 TO 2010-11 (I.E., EXCLUDES FY 2007-08, THE RELEVANT PREVIOUS YEAR). FURTHER, T HERE IS, AGAIN, NO REFERENCE IN THE SATISFACTION NOTE AS TO THE BASIS OF THE AOS S ATISFACTION OF THE SAID ACCOUNTS AS HAVING A BEARING ON THE ASSESSEES TOTAL INCOME FOR THE YEAR. NO DOUBT, NO PARTICULAR FORMAT FOR RECORDING THE SATISFACTION ST ANDS PROVIDED, BUT THE SAME MUST SPELL OUT IN CLEAR TERMS THE BASIS OF THE SAID SATISFACTION BY THE AO. IN THE PRESENT CASE, THE INCOME STANDS ALREADY RETURNED WI TH REFERENCE TO THE PROFIT (LOSS) DISCLOSED IN THE ASSESSEES OPERATING STATEM ENT (PROFIT AND LOSS ACCOUNT), 5 ITA NO.1148/MDS/2015 (AY 2008-09) KAIVALLYA ENTERTAINMENT PVT. LTD . V. DY. CIT FOUND AND SEIZED IN SEARCH. ALSO, THE BALANCE-SHEET ALSO AGREES WITH THAT FURNISHED AS A PART OF THE RETURN OF INCOME. THE OP PORTUNITY PROVIDED BY US TO THE REVENUE TO EXHIBIT THE AOS SATISFACTION WAS GU IDED PRIMARILY BY THE INTENT TO FIND THE BASIS THEREOF IN-AS-MUCH AS IT COULD WE LL BE THAT THERE HAS BEEN SOME OMISSION IN WRITING THE SATISFACTION NOTE, EVEN AS THE SATISFACTION IS OTHERWISE DISCERNIBLE FROM THE SEIZED MATERIAL ITSELF. FOR EX AMPLE WHERE A COMPARISON OF THE TWO SET OF DOCUMENTS, I.E., AS FOUND AND SEIZED AND THAT FURNISHED BY THE ASSESSEE, ITSELF REVEALS THE BASIS OF THE SAID SATI SFACTION, AS WHERE THERE IS A DIFFERENCE IN SOME CORRESPONDING FIGURE/S, VIZ. DEB TORS, CREDITORS, ETC. WE ARE UNABLE TO FIND ANY BASIS FOR THE SAID SATISFACTION NOR COULD THE LD. DR, DESPITE BEING SPECIFICALLY ASKED DURING HEARING, POINT ANY. HE, ON BEING SPECIFICALLY INQUIRED, CONFIRMED THE FULL AGREEMENT OF THE TWO S ETS OF FINAL ACCOUNTS, I.E., AS SEIZED IN SEARCH AND THAT FURNISHED, MUCH EARLIER, BY THE ASSESSEE ALON G WITH ITS RETURN OF INCOME AND, FURTHER, SUBJECT TO ASSESSMEN T. EQUALLY, THE RETURN IS IN CONFORMITY WITH THE ACCOUNTS AS FILED ALONG WITH. T RUE, THE PROVISION IS WIDELY WORDED, SO THAT THE SAME (SATISFACTION) DOES NOT NE CESSARILY HAVE TO LEAD TO A BELIEF AS TO ESCAPEMENT OF INCOME. THE INFORMATION FOUND MAY WELL BE SKETCHY, BEING (SAY) A PART OF A TRANSACTION, YET COULD PROV IDE AN IMPORTANT LEAD TO ANY INCOME ESCAPING ASSESSMENT, OR WHICH MAY REQUIRE FU RTHER INVESTIGATION IN THE MATTER. HOWEVER, IN THE PRESENT CASE, AT THE COST O F REPETITION, THERE IS NO BASIS FOR ANY SATISFACTION AND, ACCORDINGLY, THE INVOCATI ON OF S. 153C, WHICH PROVIDES FOR FRAMING AN ASSESSMENT U/S. 153A OF SUCH OTHER P ERSON, I.E., TO WHOM THE DOCUMENTS, ETC., SEIZED DURING SEARCH, RELATE, IS B AD IN LAW. IT IS IN DOUBT SURPRISING, EVEN AS OBSERVED DURING HEARING, THAT T HE ASSESSEES AUDITED ACCOUNTS WERE FOUND AT THE PLACE OF ANOTHER, BUT THAT, A VAL ID GROUND FOR MAKING FURTHER INVESTIGATION, IS BY ITSELF NOT SUFFICIENT FOR INVO KING S. 153C, OR REGARDING THE INGREDIENTS OF THE SAID PROVISION, AS SATISFIED. TH ERE HAS BEEN THUS NO VALID ASSUMPTION OF JURISDICTION FOR THE ISSUE OF NOTICE THERE-UNDER AND, ACCORDINGLY, THE IMPUGNED ASSESSMENT, FRAMED U/S. 143(3) R/W S. 153A, IS BAD IN LAW. WHILE 6 ITA NO.1148/MDS/2015 (AY 2008-09) KAIVALLYA ENTERTAINMENT PVT. LTD . V. DY. CIT THE AO DID NOT ADDRESS THIS ISSUE, I.E., AS TO JURI SDICTION, WHICH COULD PERHAPS BE FOR THE REASON THAT THE SAME WAS NOT RAISED BY THE ASSESSEE BEFORE HIM, THE LD. CIT(A), BEFORE WHOM THIS ISSUE WAS RAISED PER GD. N O.3, PROCEEDED ON THE BASIS THAT THE ASSESSEE IS THE PERSON SEARCHED, SO THAT T HE SEARCH OR THE REQUISITION IS ITSELF SUFFICIENT FOR ASSUMING JURISDICTION FOR FRA MING AN ASSESSMENT THERE-UNDER (REFER PARA 8 (THROUGH SUB-PARAS 8.1 TO 8.2.9), AT PGS. 14-25 OF THE IMPUGNED ORDER). THE SAME, AS WOULD BE APPARENT FROM THE FOR EGOING NARRATION OF FACTS AND THE MATERIAL ON RECORD, IS WITHOUT BASIS IN FAC T AND IN LAW. WE ARE CONSCIOUS, WE MAY CLARIFY, THAT THE CONDITI ON THAT THE ASSESSING OFFICER IS SATISFIED THAT THE BOOKS OF ACCOUNTS OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED HAVE A BEARING ON THE DETERMINATION O F THE TOTAL INCOME OF SUCH OTHER PERSON, STANDS INSERTED BY FINANCE (NO.2) ACT , 2014 W.E.F. 01.10.2014, SO THAT THE SAID CONDITION CANNOT BE IMPORTED FOR THE CURRENT YEAR. ALSO, THAT THE TRIBUNAL HAS NO POWER TO READ DOWN A PROVISION OF L AW AND, EVEN OTHERWISE, THE PRINCIPLE OF CAUSUS OMISSUS IS NOT TO BE LIGHTLY INVOKED. SO HOWEVER, THE SUBSEQUENT AMENDMENT TO THE PROVISION, WHICH IN FAC T IS PROMPTED BY JURISPRUDENCE IN THE MATTER, IS INDICATIVE OF THE L EGISLATIVE INTENT. THE SAME ONLY SEEKS TO CLARIFY THAT IT IS NOT ANY SEIZED MATERIAL BELONGING TO, BUT ONLY THAT WHICH HAS A BEARING ON THE DETERMINATION OF TOTAL I NCOME OF, SUCH OTHER PERSON, THAT SHALL GIVE RISE TO THE SPECIAL JURISDICTION EN VISAGED BY THE PROVISION. THE SAME ONLY SEEKS TO TAKE THE CIRCUMSTANCE OF THE SEI ZED MATERIAL FOUND IN SEARCH IN RESPECT OF THE ASSESSEE TO ITS LOGICAL CONCLUSIO N, WITHOUT WHICH THE PROVISION BECOMES OPEN ENDED AND, ACCORDINGLY, LIABLE TO BE R EGARDED AS ARBITRARY. LEGISLATIVE INTENT IS TO BE THE FOUNDATION OF ANY I NTERPRETATIVE EXERCISE. AGAIN, IT CANNOT BE LOST SIGHT OF THAT THE EARLIER ASSESSMENT MAY BE, AS IN THE INSTANT CASE, UNDER VERIFICATION PROCEDURE, I.E., U/S. 143(3) OR U/S. 144. AND, THEREFORE, IN THE ABSENCE OF ANY SUCH CAVEAT OR CONDITION IN THE PROV ISION, THE ENSUING ASSESSMENT WOULD ONLY BE A REVIEW, IMPERMISSIBLE UNDER THE SCH EME OF THE ACT (REFER: 7 ITA NO.1148/MDS/2015 (AY 2008-09) KAIVALLYA ENTERTAINMENT PVT. LTD . V. DY. CIT KALYANJI MAVJI & CO. V. CIT [1976] 102 ITR 287 (SC); CIT V. KELVINATOR OF INDIA LTD. [2010] 320 ITR 561 (SC)). WE, THEREFORE, HAVE NO HESITATION IN, ACCEPTING TH E ASSESSEES GDS. 1 TO 3, HOLDING AN ABSENCE OF JURISDICTION TO ASSESS AND, C ONSEQUENTLY, THE IMPUGNED ASSESSMENT AS BAD IN LAW. THE OTHER GROUNDS, NOT PR ESSED DURING HEARING, ARE BEING NOT ADJUDICATED INASMUCH AS THEY BECOME UNFRU CTUOUS IN VIEW OF OUR DECISION UPHOLDING THE ASSESSEES OBJECTIONS VIDE I TS GDS. 1 TO 3. WE DECIDE ACCORDINGLY. 5. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED ON JULY 27, 2017 AT CHENNAI . SD/- SD/- ( ! . '# ) (DUVVURU RL REDDY) $ /JUDICIAL MEMBER ( ) (SANJAY ARORA) /ACCOUNTANT MEMBER /CHENNAI, 3 /DATED, JULY 27, 2017. EDN 4 - /$156 76)1 /COPY TO: 1. *+ /APPELLANT 2. /0*+ /RESPONDENT 3. 81 ( )/CIT(A) 4. 81 /CIT 5. 69: /$1$ /DR 6. :#( ; /GF