ACIT, New Delhi V. M/s. Westland Developers (P) Ltd., New Delhi

ITA 1250/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97924 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 09-10-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 05-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNITA KEJRIWAL
• Keywords: Search and seizure; Document seized; Block assessment; Documents seized
• Section: 143(3); 147; 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH H NEW DELHI BEFORE : SHRI C.M. GARG , JUDICIAL MEMBER & SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 1757/DEL./2013 ASSTT. YEAR : 2006 - 07 WESTLAND DEVELOPERS PVT. LTD., VS. A.C.I.T.,CENTRAL CIRCLE 23, M - 11, MIDDLE CIRCLE, CONNAUGHT CIRCUS, NEW DELHI NEW DELHI. [PAN: AAACW1093J] ITA NO. 1250/DEL./2013 ASSTT. YEAR : 2006 - 07 A.C.I.T.,CENTRAL CIRCLE 23, VS. WESTLAND DEVELOPERS PVT. LTD., NEW DELHI. M - 11, MIDDLE CIRCLE, CONNAUGHT CIRCUS, NEW DELHI. (APPELLANT) (RESPONDENT) A SSESSEE BY : SH. M.P. RASTOGI, ADVOCATE RE VENUE BY : SMT. SUNITA KEJRIWAL, CIT/DR DATE OF HEARING : 09.10.2015 DATE OF PRONOUNCEMENT : 23 .11.2015 ORDER PER L.P. SAHU, ACCOUNTANT MEMBER: THESE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE ORDER DATED 24.12.2012 OF LD. CIT(A) - XXXIII, NEW DELHI FOR THE ASSESSMENT YEAR 2006 - 07 IN THE MATTER OF RE - ASSESSMENT PROCEEDINGS U/S. 147 OF THE IT ACT. ITA NO. 1757 & 1250/DEL./2013 2 2. THE SUM AND SUBSTANC E OF GROUNDS RAISED BY ASSESSEE IN ITS APPEAL IS AS UNDER : (I). THAT THE ACTION TAKEN U/S. 143(3)/147 INSTEAD OF SECTION 153C, IS VOID AB INITIO , HAVING BEEN BEYOND JURISDICTION OF AO; (II). THAT THE SUSTENANCE OF ORDER U/S. 147 IS NOT JUSTIFIED WITH REF ERENCE TO THE FINDING OF CIT(A) THAT NO MATERIAL BELONGING TO THE ASSESSEE WAS SEIZED DURING THE COURSE OF SEARCH ; (III). THAT THE CONCLUSION OF CIT(A) THAT SEIZED DOCUMENTS PROVE THE INTEREST PAID ON PDC, IS NOT SUSTAINABLE BECAUSE NO DOCUMENT BELONG TO ASSESSEE , NO ENQUIRY WAS MADE FROM ANY OF THE ALLEGED RECIPIENT AND NO CORROBORATING INDEPENDENT EVIDENCE WAS FOUND; AND (IV) THAT CIT(A) ERRED IN UPHOLDING THE ADDITION OF INTEREST FOR THE PERIOD FOR WHICH PDC S WERE EXTENDED AND DIRECTING THE AO TO COMP UTE THE INTEREST AFTER SIX MONTHS FROM THE DATE OF SALE. THE REVENUE, ON THE OTHER HAND CHALLENGED THE IMPUGNED ORDER ON THE GROUND THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.33,78,805/ - OUT OF TOTAL ADDITION OF RS.34,67,098/ - MADE BY AO. 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ORIGINAL ASSESSMENT ORDER OF THE ASSESSEE WAS COMPLETED U/S. 143(3) OF THE ACT AT AN INCOME OF RS.8,01,951/ - ON 31.12.2008. SUBSEQUENTLY, ON THE BASIS OF CERTAIN DOCUMENTS SEIZED DURING ITA NO. 1757 & 1250/DEL./2013 3 THE SEARCH AND SEIZURE OPER ATION ON BPTP LTD. AND ITS GROUP COMPANIES ON 15.11.2007 AND ON THE BASIS OF POST SEARCH ENQUIRIES MADE, THE AO NOTICED THAT THE GROUP COMPANIES OF BPT P WERE FOLLOWING THE MODUS OPERANDI OF BUSINESS THAT ONLY PART PAYMENTS OF THE SALE CONSIDERATION IN RESP ECT OF THE LAND PURCHASED WERE PAID AT THE TIME OF EXECUTION OF THE SALE - D E ED AND THE PAYMENTS OF BALANCE SALE CONSIDERATION WERE INVARIABLY MADE THROUGH POST DATED CHEQUES (PDCS) AND FOR THE INTERVENING PERIOD BETWEEN THE DATE OF SALE DEED AND THE DATE OF ENCASHMENT OF PDCS, INTEREST WAS PAID IN CASH TO THE VENDORS OF THE LAND BY VENDEE COMPANY ON MONTHLY INTEREST OF 1.25% ON THE AMOUNT OF PDCS AND THIS INTEREST WAS NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. ACCORDINGLY, NOTICE U/S. 148 WAS ISSUED AND SERV ED UPON THE ASSESSEE, IN RESPONSE TO WHICH THE ASSESSEE FILED RETURN OF INCOME DECLARING INCOME AT RS.98,790/ - . THE REASONS RECORDED PROVIDED TO THE ASSESSEE. IN RESPONSE TO NOTICE U/S. 143(2) THE ASSESSEE FURNISHED ITS EXPLANATION. HOWEVER, THE AO WAS NOT SATISFIED THEREWITH AND COMPUTED A SUM OF RS.34,67,098/ - PAID BY ASSESSEE TO THE VENDORS AS INTEREST ON PDCS ISSUED TO THEM. THE AO , FINDING THIS INTEREST HAVING NOT BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNT, ADDED THE SAME TO THE INCOME OF THE ASSESSEE BEING PAID OUT OF ITS UNDISCLOSED SOURCES. ITA NO. 1757 & 1250/DEL./2013 4 4. THE ASSESSEE CHALLENGED THE ORDER OF AO IN APPEAL BEFORE THE LD.CIT(A) BOTH ON VALIDITY OF ORDER U/S. 147 AS WELL AS MERITS OF ADDITION. THE LD. CIT(A) AFTER CONSIDERING THE MATTER AT LENGTH CONCLUDED THAT THE ACTION TAKEN U/S. 147 WAS LEGALLY VALID AND ON MERITS DIRECTED THE AO TO COMPUTE THE INTEREST FOR THE EXTENDED PERIOD OF PDC, I.E., AFTER 6 MONTHS FROM THE DA TE OF SALE ON CONSERVATIVE SIDE AND ACCORDINGLY, THE APPEAL OF THE ASSESSEE WAS PARTLY ALLOWED VIDE THE IMPUGNED ORDER. BOTH THE PARTIES ARE NOT SATISFIED WITH THE IMPUGNED ORDER, HENCE, THESE CROSS APPEALS. FOR THE SAKE OF CONVENIENCE, WE PROCEED TO DECIDE THE APPEAL OF THE ASSESSEE FIRST. 5. THE LD. AR OF THE ASSESSEE CHALLENGING THE IMPUGNED ORDER, REITERATED ARGUMENTS MADE BEFORE THE LD. CIT(A) AND ALSO FILED A WRITTEN SYNOPSIS BEFORE US, WHICH WE SHALL DEAL IN THE FOL LOWING PARAGRAPH. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER PASSED BY THE AO. 6. AFTER HEARING THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY PERUSING THE ENTIRE MATERIAL AVAILABLE ON RECORD, WE FIND THAT ON THE VALIDITY OF ACTION U/S. 147, THE ASSESSEE HAS TAKEN TWO FOLD STANDS, INASMUCH AS, THE ORDER PASSED BY THE AO IS VOID AB I NITIO BECAUSE IT OUGHT TO HAVE BEEN MADE U/S. 153C AND NOT U/S. 143(3)/147 OF THE ACT AND SECONDLY, ONCE NO MATERIAL ITA NO. 1757 & 1250/DEL./2013 5 BELONGING TO THE ASSESSEE WAS ADMITTEDLY FOUND DURING THE COURSE OF SEARCH, THE REASONS SO RECORDED FOR FORMING THE BELIEF OF ESCAPEMENT OF INCOME ARE VAGUE AND HENCE, THE CONSEQUENTIAL ORDER PASSED U/S. 147 IS NOT SUSTAINABLE HAVING BEEN PASSED BEYOND JURISDICTION . AS FAR AS THE FIRST LIMB OF ASSESSE E S STAND IS CONCERNED, WE FIND THAT THERE IS NO BAR TO RESORT TO THE PROVISIONS OF SECTION 148/147 ON THE BASIS O F INFORMATION RECEIVED BY AO REGARDING SEIZURE OF ANY DOCUMENT OR VALUABLES BELONGING TO THE PERSON OTHER THAN THE PERSON SEARCHED. THE HON BL E SUPREME COURT IN THE CASE OF POORAN MAL VS. DIRECTOR OF IN S PECTION (INV) RELIED UPON BY THE LD. CIT(A) HAS LAID DOWN THE PRINCIPLE THAT EVEN IF THE SEARCH AND SEIZURE WERE IN CONTRAVENTION OF THE PROVISIONS OF SECTION 132, STILL THE MATERIAL SEIZED WAS L IABLE TO BE USED SUBJECT TO LAW AGAINST THE PERSON FROM WHOSE CUSTODY IT WAS SEIZED. IN OUR CONSIDERED OPINION, THE SAME ANALOGY MAY ALSO BE APPLIED TO THE PERSON OTHER THAN THE PERSON SEARCHED IF SOME DOCUMENTS BELONGING TO HIM ARE FOUND AND SEIZED DURING THE COURSE OF A SEARCH. THE DECISION OF HON BLE SUPREME COURT NOWHERE PUTS A BAR ON THE ACTION AGAINST THE THIRD PARTY U/S. 147 IF ANY INFORMATION WITH REGARD TO DETECTION OF MATERIAL BELONGING TO IT IS RECEIVED BY THE AO. MOREOVER, ITAT, LUCKNOW BENCH IN THE CASE OF ACIT VS. M/S. SHIVAM GRAMODYOG SANSTHAN, KANPUR (ITA NO. 110 TO 113/LKW/2012) VIDE ORDER ITA NO. 1757 & 1250/DEL./2013 6 DATED 10.12.2014, AFTER CONSIDERING THE DECISION OF HON BLE APEX COURT (SUPRA), HELD AS UNDER IN THE CASE OF PERSON OTHER THAN THE PERSON SEARCHED : 14. IT IS ALSO SETTLED POSITION OF LAW AS HELD BY THE HON'BLE APEX COURT IN THE CASE OF POORAN MAL VS. DIRECTOR OF INSPECTION (SUPRA) AND THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF DR. SHARAD B SAHAI AND ANOTHER VS. CIT (SUPRA) THAT WHERE SEARCH AND SEIZURE WERE IN CONTRAVENTION OF THE PROVISIONS OF SECTION 132 OF THE ACT AND IS HELD TO BE ILLEGAL, STILL TH E MATERIAL SEIZED WAS LIABLE TO BE USED SUBJECT TO THE LAW BY THE INCOME - TAX AUTHORITIES. THEREFORE, WE ARE OF THE VIEW THAT THE INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH AT PREMISES NO.E - 1, E - 13, SITE - I, UPSIDC INDUSTRIAL AREA, RANIA, KANPU R DEHAT CAN BE USED BY THE INCOME - TAX AUTHORITIES AGAINST THE PERSON/PARTY TO WHOM IT RELATE, IN ACCORDANCE WITH THE LAW, THOUGH THE SEARCH MAY BE HELD TO BE ILLEGAL, AS THE WARRANT OF AUTHORIZATION WAS ISSUED IN THE WRONG NAME. 15. IN THE CASE OF DR. SHARAD B SAHAI AND ANOTHER VS. CIT (SUPRA), THE HON'BLE JURISDICTIONAL HIGH COURT HAS HELD THAT IT IS THE SETTLED PRINCIPLE OF LAW THAT EVEN IF SEARCH IS DECLARED ILLEGAL, THE MATERIAL FOUND AT THE TIME OF SEA RCH CAN BE UTILIZED FOR THE PURPOSE OF ASSESSMENT. THEREFORE, THE COORDINATED POST SEARCH INVESTIGATION AND MEANINGFUL ASSESSMENT HAS TO TAKE PLACE IT MAY BE THAT ON ACCOUNT OF SEARCH BEING DECLARED ILLEGAL, THE BLOCK ASSESSMENT UNDER SECTION 158BC OF THE ACT CANNOT BE MADE BUT THE REGULAR ASSESSMENT OR THE RE - ASSESSMENT CONTEMPLATED UNDER THE ACT CAN BE MADE. THEREFORE, INITIATION OF PROCEEDINGS UNDER SECT ION 148 OF THE ACT READ WITH SECTION 147 OF THE ACT BY THE ADDL. CIT CANNOT BE SAID TO BE WITHOUT JURISDICTION. 16. IN THE LIGHT OF THE AFORESAID JUDGMENTS, WE ARE OF THE CONSIDERED VIEW THAT THE IMPUGNED INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH CAN BE USED BY THE ASSESSING OFFICER AGAINST THE ASSESSEE, AS IT RELATE TO IT. THE LD. COUNSEL FOR THE ASSESSEE HAS NOT PLACED BEFORE US ANY JUDICIAL PRONOUNCEMENT FOR THE PROPOSITION THAT THE MATER IAL BELONGING TO THE PERSON OTHER THAN THE PERSON SEARCH, FOUND AND SEIZED IN T HE SEARCH AND SEIZURE ITA NO. 1757 & 1250/DEL./2013 7 OPERATION, CANNOT BE USED AGAINST SUCH PERSON FOR THE PURPOSE OF ASSESSMENT U/S. 147 . ACCORDINGLY, THE FIRST LIMB OF ASSESSEE S STAN D CHALLENGING THE VALID ITY OF ACTION U/S. 147 IS REJECTED. 7. NOW ADVERTING TO THE SECOND LIMB OF ASSESSEE S STAND, I.E., WHETHER THE REASONS RECORDED FOR FORMING THE BELIEF OF ESCAPEMENT OF INCOME ON THE BASIS OF MATERIAL SEIZED ARE JUSTIFIED OR VAGUE TO TAKE RECOURSE OF SECTI ON 147. IN THIS CONTEXT, ON PERUSAL OF THE ORDERS OF AUTHORITIES BELOW, WE FIND THAT THE ASSESSEE HAS CATEGORICALLY DENIED THAT ANY OF THE SEIZED DOCUMENTS, DISCUSSED IN THE IMPUGNED ORDER, BELONGED TO THE ASSESSEE. WE ALSO FIND THAT THE ASSESSMENT ORDER A LSO NOWHERE RECORDS ANY FINDING THAT ANY OF THE DOCUMENTS SEIZED BELONG TO THE ASSESSEE. EVEN THE LD. CIT(A) AT PARA 4.3 HAS CATEGORICALLY STATED THAT THE ASSESSMENT ORDER NOWHERE MENTIONS THAT ANY PART OF THE SEIZED MATERIAL BELONG TO THE APPELLANT COMPAN Y. THE ASSESSEE HAS BEEN DENYING TO HAVE PAID ANY INTEREST ON PDCS. NO COGENT MATERIAL WAS FOUND DURING THE COURSE OF SEARCH WHICH COULD REPEL THIS CONTENTION OF ASSESSEE. THE REASONS HAVE BEEN RECORDED BY THE AO AFTER DRAWING THE INFERENCE FROM THE SEIZE D DOCUMENTS THAT TREND OF PAYMENT OF INTEREST ON PDCS BY THE GROUP COMPANIES STOOD DEPICTED AND THE ASSESSEE BEING A GROUP COMPANY OF BPTP LTD., MIGHT HAVE ALSO PAID INTEREST ON SUCH PDCS. THIS APPROACH OF THE ITA NO. 1757 & 1250/DEL./2013 8 AUTHORITIES BELOW, TO OUR MIND, IS NOT TENABLE AT ALL BEING BASED ON FAKE INFERENCES DRAWN . THE ASSESSEE IS A SEPARATE AND DISTINCT ASSESSEE UNDER THE ACT AND IS TO BE ASSESSED ON THE BASIS OF MATERIAL WHICH BELONGS TO IT OR SPECIFICALLY RELEVANT FOR ITS ASSESSMENT. IN THE INSTANT CASE NO SPECIFIC DOC UMENT IS POINTED OUT BELONGING TO THE ASSESSEE NOR ANY EVIDENCE OR MATERIAL, WHATSOEVER, HAS BEEN DEMONSTRATED BY THE AUTHORITIES BELOW TO SHOW THAT THE ASSESSEE HAD PAID INTEREST ON PDCS. THEREFORE, THERE BEING NO DEFINITE MATERIAL BELONGING TO THE ASSESSEE, IN OUR OPINION, THE REASONS RECORDED FOR INITIATION OF PROCEEDINGS U/S. 147 AGAINST THE ASSESSEE, ARE NOT IN CONSONANCE WITH LAW, HAVING BEEN BASED ON MERE SUPPOSITIONS AND SURMISES AN D EXTRAPOLATION OF MATERIAL SEIZED . THE FACT THAT THE ASSESSEE IS A GROUP COMPANY OF BPTP LTD. AND OVERALL MANAGEMENT IS CONTROLLED BY ONE PERSON CANNOT BE EQUATED WITH THE EXISTENCE OF INCRIMINATING MATERIAL BELONGING TO THE ASSESSEE FOR DRAWING THE ADVER SE INFERENCE. WE, THEREFORE, FIND CONSIDERABLE FORCE IN THE CONTENTION OF THE ASSESSEE THAT ASSESSMENT IS BASED ON ALIEN MATERIAL HAVING NO SPECIFIC NEXUS WITH THE ASSESSEE AND THAT THERE IS NO CORROBORATING AND INDEPENDENT EVIDENCE TO JUSTIFY THAT THE ASS ESSEE HAD PAID INTEREST OF PDCS, AS ALLEGED BY THE AUTHORITIES BELOW. THE ACTION TAKEN U/S. 147 BY THE AO IS, THEREFORE, VOID AB INITIO AND NOT SUSTAINABLE, HAVING BEEN RESORTED TO ON VAGUE REASONS. ITA NO. 1757 & 1250/DEL./2013 9 8. ONCE, AS OBSERVED ABOVE, WE HAVE HELD THE PROCEEDIN GS U/S. 147 AS VOID, WE NEED NOT TO ENTER INTO THE MERITS OF ADDITIONS CHALLENGED BY ASSESSEE BY WAY OF OTHER GROUNDS AND ALSO BY THE REVENUE IN ITS APPEAL. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS LIABLE TO BE ALLOWED AND THAT OF REVENUE TO BE DISMISSED . 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.11.2 015 . SD/ - SD/ - ( C.M. GARG ) (L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 23.11.2015 *AKS/ - COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT. REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI