ACIT, New Delhi V. M/s. Archon Estate Pvt. Ltd., New Delhi

ITA 142/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4492 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 08-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Keywords: Bogus Share capital; Search and seizure; Document seized; Principle of natural justice; Documents seized
• Section: 142(1); 32; 68; 132

Judgement Text

1 ITA NOS. 140 & 141 &142/D EL/2015 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEM BER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER ITA NO. 140/DEL/2015 ( A.Y 2006-07) ITA NO. 141/DEL/2015 ( A.Y 2007-08) & ITA NO. 142/DEL/2015 ( A.Y 2009-10) ACIT CENTRAL CIRCLE-30 NEW DELHI (APPELLANT) VS ARCHON ESTATE PVT. LTD. 910, ANSAL BHAVAN, 16, K. G. MARG NEW DELHI AAFCA0799Q (RESPONDENT) APPELLANT BY SMT. APARNA KARAN, CIT(DR) RESPONDENT BY NONE ORDER PER SUCHITRA KAMBLE, JM THESE APPEALS ARE FILED BY THE REVENUE AGAINST THE ORDER DATED 29/09/2014 PASSED BY CIT(A)-XXXIII, NEW DELHI. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- ITA NO. 140/DEL/2015 ( A.Y 2006-07) 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) HAS ERRED IN LAW IN HOLDING THAT THE JURISDI CTION ASSUMED U/S 153C IN THE CASE OF THE ASSESSEE IS NOT IN ACCORDAN CE WITH LAW. DATE OF HEARING 21.09.2017 DATE OF PRONOUNCEMENT 28.09.2017 2 ITA NOS. 140 & 141 &142/D EL/2015 2. THE ORDER OF THE CIT(A) IS ERRONEOUS AND IS NO T TENABLE ON FACTS AND IN LAW. ITA NO. 141/DEL/2015 ( A.Y 2007-08) 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) HAS ERRED IN LAW IN HOLDING THAT THE JURISDI CTION ASSUMED U/S 153C/143(C) IN THE CASE OF THE ASSESSEE IS NOT IN A CCORDANCE WITH LAW. 2. THE ORDER OF THE CIT(A) IS ERRONEOUS AND IS NO T TENABLE ON FACTS AND IN LAW. ITA NO. 142/DEL/2015 ( A.Y 2009-10) 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) HAS ERRED IN LAW IN HOLDING THAT THE JURISDI CTION ASSUMED U/S 153C/143(C) IN THE CASE OF THE ASSESSEE IS NOT IN A CCORDANCE WITH LAW. 2. THE ORDER OF THE CIT(A) IS ERRONEOUS AND IS NO T TENABLE ON FACTS AND IN LAW. 4. A SEARCH AND SEIZURE OPERATION U/S 132 OF THE I NCOME-TAX ACT 1961, WAS CONDUCTED BY THE INVESTIGATION WING OF TH E DEPARTMENT ON 22/3/2011 IN THE AMTEK GROUP OF CASES. THE PREM ISES OF M/S INFOTEK PVT. LTD. & ORS WERE ALSO SEARCHED U/S 132( 1) OF THE INCOME TAX ACT, 1961 WHICH IS A GROUP COMPANY OF AMTEK GRO UP. THE DOCUMENTS BELONGING TO THE ASSESSEE M/S ARCHON ESTA TES PVT. LTD. WERE ALSO FOUND AND SEIZED FROM THE PREMISES OF M/S EXCEL INFOTEK 3 ITA NOS. 140 & 141 &142/D EL/2015 PVT. LTD. IN WHOSE NAME SEARCH WARRANT OF AUTHORIZA TION WAS ISSUED. THE CASE WAS CENTRALIZED WITH CENTRAL CIRC LE, 14 (NEW DELHI) VIDE OREDE DATED 10/1/2013. ACCORDINGLY NOTI CE U/S 153C OF THE INCOME TAX ACT, WAS ISSUED TO THE ASSESSEE ON 1 5/1/2015. THE SATISFACTION NOTE IN THIS REGARD WAS SUPPLIED TO TH E ASSESSEE ON 14/1/2013 ON HIS REQUISITION. IN RESPONSE TO THE S AID NOTICE THE RETURN DECLARING AN INCOME OF RS.4,920/- WAS FILED ON 31/1/2013. NOTICE U/S 143(2) & 142(1) OF THE INCOME TAX ACT, 1 961 WERE ISSUED ALONG WITH A QUESTIONNAIRE DATED 31/1/2013 DULY SER VED UPON THE ASSESSEE AND CASE WAS FIXED FOR HEARING. IN RESPON SE TO VARIOUS STATUTORY NOTICES CA ALONG WITH VIDE PRESIDENT OF A MTEK GROUP OF COMPANIES ATTENDED THE PROCEEDINGS AND FURNISH NECE SSARY DETAILS INFORMATION AND DOCUMENTS CALLED FOR FROM TIME TO T IME WHICH WERE PLACED ON RECORD BY THE ASSESSING OFFICER. IN VIEW OF THE INFORMATION FILED THE CASE WAS DISCUSSED WITH THE ASSESSEES RE PRESENTATIVES. M/S ARCHON ESTATE PVT. LTD INCORPORATED ON 3 RD DAY OF JANUARY 2015 TO CARRY ON THE BUSINESS OF REAL ESTATE. DURI NG THE COURSE OF SEARCH, CERTAIN DOCUMENTS WERE FOUND AND SEIZED FOR THE OFFICE OF AMTEK GROUP COMPANIES. THESE DOCUMENTS REPRESENTED THE AUDITED BALANCE-SHEET AND PROFIT AND LOSS ACCOUNT O F THE GROUP COMPANIES M/S ARCHON ESTATES PVT. LTD FOR THE YEARS 31/3/2006, 31/3/2007, 31/3/2008 & 31/3/2009. THE BALANCE SHEE T AS ON 31/3/2008 AND 31/3/2009 SHOWS THE SAME SHARE FROM T IME TO TIME FOR RS. 69,95,80,000/-. THE SAME WAS CONFRONT ED TO SHRI ARVIND DHAM, CHAIRMAN OF THE GROUP AND WAS ASKED AB OUT THE SOURCE OF THE SHARE PREMIUM AND SHARE CAPITAL IN TH E COMPANY. IN 4 ITA NOS. 140 & 141 &142/D EL/2015 HIS STATEMENT RECORDED U/S 132(4) OF THE ACT, DURIN G THE COURSE OF SEARCH, HE STATED THAT HE CANNOT GAVE THE NAME AND ADDRESS OF SHARE HOLDERS BUT HE WILL GIVE THE DETAILS OF SHARE HOLDERS WITHIN TWO DAY WAS FURTHER THAT HE CANNOT EXPLAIN THESE OPINIO NS AND TO BY PEACE OF MIND HE WAS READY TO DISCLOSED THE SAME AS UNDISCLOSED INCOME OF THE COMPANY. FURTHER, THE ASSESSEE HAS F URNISHED THE DETAILS OF SHARE HOLDERS OF THESE COMPANIES. ON PE RUSAL OF SUBMISSION IT WAS SEEN THAT FOLLOWING ARE THE YEAR WISE SHARE HOLDERS OF M/S ARCHON ESATES PVT. LTD AND SHARE HOL DERS AS ON 31/3/2006: 1. AMTEK INDIA LTD. 2. SHAREHOLDERS AS ON 31/3/2008; 1 AMTEK RING GEARS LTD 2. AMTEK CRANKSHAFT INDIA LTD. SHAREHOLDERS AS ON 3 /3/2009; 1. EXCEL HOSIERY PVT. LTD. 2. DREAM LAND BUILDTECH PVT. LTD. 3. EQUATROR CHEMICALS (P) LTD. 4. INDIVIDUAL (NAME NOT GIVEN) THE CONTENTS OF THE SEIZED DOCUMENTS WERE VERIFIED FROM THE AUDIT BALANCE SHEET OF THE ASSESSEE FOR THE YEAR EN D ON 31/3/2006 AND 31/3/2008 BY THE ASSESSING OFFICER. IT WAS FOUN D THAT SHARE CAPITAL AND SHARE PREMIUM OF RS.24,50,00,000/- AND RS.51,00,00,000/- WERE INTRODUCED IN THE RESPECTIVE YEARS DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE W AS ASKED TO FURNISH THE CONFIRMATIONS OF THE PERSONS FROM WHOM THE SHARE 5 ITA NOS. 140 & 141 &142/D EL/2015 CAPITAL WAS OBTAINED ALONG WITH THEIR BANK STATEMEN TS. THE ASSESSEE SUBMITTED THE CONFIRMATION OF THE SHARE CA PITAL AND SHARE PREMIUM. IN BOTH THE ASSESSMENT YEARS 2006-07 & 20 08-09 WHICH WAS RECEIVED FROM ITS MAIN GROUP COMPANIES I.E. M/S AMTEK INDIA LTD. IN ASSESSMENT YEAR 2006-07 & FROM M/S AMTEK CR ANKSHAFT INDIA LTD. AND M/S AMTEK RING GEARS LTD. IN ASSESS MENT YEAR 2008-09. THE ASSESSEE ALSO EXPLAINED IN DETAILS WI TH SUPPORTING/RELEVANT DOCUMENTS VIDE LETTER DATED 11/ 3/2013 THAT THE ADDITION IN THE SHARE CAPITAL/PREMIUM WAS MADE THROUGH LIMITED COMPANIES AND ALL THESE COMPANIES WERE FLAG SHIP COMPANIES OF AMTEK GROUP HAVING USE FREE RESERVE AND SURPLUS. THUS, THE ABOVE SHARE CAPITAL OF RS.24,50,00,000/- INTRODUCED DURING THE YEAR UNDER CONSIDERATION WAS DULY VERIFIED WHICH WA S CONVERTED INTO SHARE CAPITAL FROM THE UNSECURED LOANS OF RS.2 4,50,00,000/- RECEIVED IN THE EARLIER FINANCIAL YEAR 2004-05. TH E ASSESSING OFFICER OBSERVED THAT SINCE THE INVESTIGATION WING MENTIONED NOTHING OR GIVEN IN DETAILS OF ANY INCRIMINATING DO CUMENTS PERTAINING TO SHARE CAPITAL IN THIS COMPANY WHICH P RIMA FACIE GIVES AND COMMUNICATIONS OR PROVING THAT THE SHARE CAPITA L WAS SUSPICIOUS EXCEPT THE STATEMENT OF SHRI ARVIND DHAM CHAIRMAN OF AMTEK GROUP. HENCE, IN THIS REGARD, LETTER DATED 7 /3/2013 TO ADDITIONAL DIT INVESTIGATION (UNIT 1) NEW DELHI THR OUGH ADDITIONAL CIT, CENTRAL WING NEW DELHI TO GIVE FURTHER EVIDENC E/INCRIMINATING DOCUMENTS IN HIS POSSESSION IF ANY ON THE BASIS OF WHICH ADDITION OF RS.69,95,80,000/- CAN BE MADE TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF UNEXPLAINED SHARE CAPITAL AND SHARE PREM IUM EVEN AFTER 6 ITA NOS. 140 & 141 &142/D EL/2015 FILING THE CONFIRMATION OF THE SAME BY THE ASSESSEE ALONG WITH THEIR BANK STATEMENT. IN THIS REGARD, DDIT, INVESTIGATIO N UNIT REPLIED THAT THE SEIZED AND POST SEARCH MATERIAL HAS ALREAD Y BEEN HANDED OVER TO CENTRAL CIRCLE, 14 (NEW DELHI) AND THERE WA S NO FURTHER EVIDENCE/DOCUMENTS AND MATERIAL LYING IN THAT OFFIC E. HENCE, THEY ADVISED TO TAKE DECISION BASED ON THE INTERPRETATIO N OF THE MATERIAL AVAILABLE ON RECORD SINCE THE DDIT, INVESTIGATION U NIT 1 WHICH HAD NO OTHER INCRIMINATING DOCUMENTS IN THEIR POSSESSIO N APART FROM THE STATEMENT OF SHRI ARVIND DHAM. THE ASSESSEE FIL ED THE CONFIRMATIONS OF THE SHARE CAPITAL AND SHARE PREMIU M IN BOTH THE ASSESSMENT YEAR 2006-07 & 2008-09 WHICH WAS RECEIVE D FROM WHICH IS MAIN GROUP COMPANIES I.E. M/S AMTEK INDIA LTD. FOR ASSESSMENT YEAR 2006-07 AND FROM M/S AMTEK CRANKSHA FT INDIA LTD. AND M/S AMTEK RING HEAR LTD IN ASSESSMENT YEA R 2008-09 RESPECTIVELY. THE ASSESSING OFFICER, THEREFORE, OB SERVED THAT THE ASSESSEE PROVED THE REQUIREMENTS OF SECTION 68 OF T HE INCOME TAX ACT, I.E. INDENTITY OF THE PERSON, GENUINENESS OF T HE TRANSACTIONS AND CREDITWORTHINESS OF THE SHARE HOLDERS. HENCE, N O ADVERSE VIEW ON THIS ISSUE WAS DRAWN BY THE ASSESSING OFFICER. THE ASSESSING OFFICER FURTHER OBSERVED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTICED THAT THE ASSESSEE COMPAN Y FURTHER INVESTIGATED SHARE CAPITAL OF RS.24,50,00,000/- FOR ACQUISITION OF PROPERTY FOR A TOTAL CONSIDERATION OF RS. 27 CRORE MEASURING 3185 SQUARE METER IN THE MONTH OF MARCH 2005. THIS PROP ERTY HAS A BUILT UP AREA COVERED ARE OF 464.5 SQUARE METERS AP PROXIMATELY 5,000/- SQUARE FEES WHICH IS BEING USED AS SECRETAR IAL OFFICE OF 7 ITA NOS. 140 & 141 &142/D EL/2015 AMTEK GROUP OF COMPANIES BUT NO RENTAL INCOME WAS S HOWN IN THE RETURN OF INCOME OF THE ASSESSEE COMPANY FROM THIS PROPERTY. SINCE, THE SAID PROPERTY WAS USED AS SECRETARIAL OF FICE OF AMTEK GROUP OF COMPANIES. HENCE, THE ASSESSING OFFICER O BSERVED THAT IT SHOULD HAVE EARN RENTAL INCOME FROM THIS PROPERTY. ACCORDINGLY, THE INCOME OF RS.60 LAKHS WAS TREATED AS RENTAL INC OME U/S 23 OF THE INCOME TAX ACT, EARN BY THE ASSESSEE COMPANY FR OM THE PROPERTY. IN THIS WAY, AFTER GIVING THE REPEAT OF 30% ON ACCOUNT OF REPAIRING AND MAINTENANCE U/S 24 OF THE INCOME TAX ACT, THE NET RENTAL INCOME COMES TO RS.42 LAKHS WHICH WAS ADDED BACK TO THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERA TION. 5. AGGRIEVED BY THIS ORDER, THE ASSESSEE FILED APPE AL BEFORE THE CIT(A). 6. THE CIT(A) HELD THAT THE SATISFACTION WAS WRITTE N IN THE FILE OF THE ASSESSEE, INSTEAD OF PERSON SEARCH AND AT THE END OF SATISFACTION NOTE IT WAS WRITTEN THAT THE NOTICE U/ S 153C ISSUED TO M/S ARCHON ESTATE PVT. LTD. THUS, THE SATISFACTION NOTE U/S 153C WAS RECORDED IN ASSESSEES FILE AND NOT IN THE FILE OF THE PERSON WHO WAS SEARCHED. THUS, THE CIT(A) HELD THAT SATISFACT ION NOTE FOR INITIATION OF PROCEEDINGS U/S 153C WAS NOT RECORDED IN THE CASE OF THE PERSON SEARCH U/S 132. THE CIT(A) FURTHER HELD THAT THE JURISDICTION ASSESSMENT U/S 153C IN THE CASE OF THE ASSESSEE WAS NOT IN ACCORDANCE WITH THE FINDINGS OF THE ITAT IN THE CASE OF DSL PROPERTIES PVT. LTD. THEREFORE, THE CIT(A) CONCLUD ED THAT THE JURISDICTION U/S 153C WAS NOT ASSUMED PROPERLY AND IN ACCORDANCE 8 ITA NOS. 140 & 141 &142/D EL/2015 WITH LAW AS PER THE DECISION OF THE ITAT IN CASE OF M/S DSL PROPERTIES LTD. VS. DCIT BEING ITA NO. 1344/DEL/201 2 DATED 22/3/2013, THE ASSESSES APPEAL WAS PARTLY ALLOWED BY THE CIT(A). 6. BEING AGGRIEVED BY THE SAID, THE REVENUE IS IN A PPEAL BEFORE US. 7. THE LD. DR SUBMITTED THAT THE CIT(A) HAS OVER LO OKED THE FACT THAT THE SATISFACTION WAS RECORDED BY THE ASSESSING OFFICER ISSUING NOTICE U/S 153C AND THE SAME IS SUFFICIENT AS THE A SSESSING OFFICER FOR SEARCH PARTY AND FOR THE ASSESSING OFFICER IS ONE AND THE SAME. THE LD. DR RELIED UPON THE HONBLE DELHI HIGH COURT IN THE CASE OF PRINCIPAL CIT VS. M/S NAU NIDH OVERSEAS PVT. LTD. D ATED 3 RD FEBRUARY 2017 WHEREIN IT IS HELD THAT THE SATISFACT ION RECORDED BY THE OFFICER ISSUING NOTICE U/S 153C IS SUFFICIENT I F THE ASSESSING OFFICER OF THE SEARCH PERSON AND THIRD PARTY ARE TH E SAME. THERE IS NO REPRESENTATION DURING THE HEARING ON BEHALF OF T HE ASSESSEE. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. IT CAN BE SEEN THAT ABOUT THE ISSUE OF SATISFACTION RECORDED OR NOT, THE CIT(A) HAS NOT TA KEN COGNIZANCE OF THE ITAT DECISION IN CASE OF DSL PROPERTIES PVT. LT D. THE CIT(A) HELD AS UNDER: 9. I HAVE ALREADY CONCLUDED THAT THE SATISFACTION NOTE IS NOT RECORDED IN THE FILE OF THE ASSESSEE SEARCHED U/S 1 32 AND DOCUMENTS CLAIMED TO BE OWNED BY THE APPELLANT WAS TRANSFERRED THE FILE OF THE APPELLANT. THEREFORE, THE JURISDIC TION ASSUMED U/S 153C IN THE CASE OF THE APPELLANT IS NOT IN ACCORDA NCE WITH THE 9 ITA NOS. 140 & 141 &142/D EL/2015 FINDINGS OF HONBLE ITAT IN THE CASE OF DSL PROPERT IES (P) LTD CITED SUPRA. THEREFORE, IT IS CONCLUDED THAT THE JURISDI CTION U/S 153C IS NOT ASSUMED PROPERLY AND IN ACCORDANCE WITH THE LAW AS PER THE DECISION OF HONBLE ITAT CITED SUPRA. ACCORDINGLY, THE ASSESSMENT ORDER PASSED U/S 153C FOR ALL THE ASSESSMENT YEARS ARE HEREBY QUASHED. 10. ALL THE APPEALS ARE HAVING SIMILAR ISSUES. THE CIT(A) HAS ALSO NOT DEALT THE ISSUE IN RESPECT OF THE MERITS OF THE CASE. THE HONBLE DELHI HIGH COURT IN THE CASE OF PRINCIPAL CIT VS. M/S NAU NIDH OVERSEAS PVT. LTD. DATED 3 RD FEBRUARY 2017 WHEREIN IT IS HELD THAT THE SATISFACTION RECORDED B Y THE OFFICER ISSUING NOTICE U/S 153C IS SUFFICIENT IF THE ASSESS ING OFFICER OF THE SEARCH PERSON AND THIRD PARTY ARE THE SAME. BUT IN THE PRESENT CASE THE SAME WAS NOT LOOKED INTO BY THE CIT(A). TH EREFORE, THE ORDER OF THE CIT(A) IS SET ASIDE AND REMANDED BACK TO THE FILE OF THE CIT(A) FOR A FRESH ADJUDICATION. NEEDLESS TO SAY, T HE ASSESSEE BE GIVEN PROPER OPPORTUNITY OF HEARING FOLLOWING PRINC IPLES OF NATURAL JUSTICE. 9. IN RESULT, ALL THE APPEALS OF THE REVENUES AR E PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH SEPTEMBER, 2017 . SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 28/09/2017 10 ITA NOS. 140 & 141 &142/ DEL/2015 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 22/09/2017 PS 2. DRAFT PLACED BEFORE AUTHOR 22/09/2017 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2017 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 28.09.2017 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 2 8 .09.2017 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 11 ITA NOS. 140 & 141 &142/ DEL/2015