Prithvi Developers & Builders, Mangalore V. DCIT, Mangalore

ITA 1436/BANG/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76998 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2014
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 01-07-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 05-11-2012
• Court: TRIBUNAL
• Department Lawyers: PRISCILLA SINGSIT CITIIIDR
• Assessee Lawyers: NAVEEN TAO
• Keywords: Unexplained investment; Business income; Validity of assessment; Revised return
• Section: 143(3); 133A; 153A; 69; 132; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI PRAMOD M. JAGTAP, ACCOUNTANT MEMBER AND SHRI N.V. VASUDEVAN, JUDICIAL MEMBER ITA NOS.1436 & 1437/BANG/2012 ASSESSMENT YEARS : 2006-07 & 2007-08 PRITHVI DEVELOPERS & BUILDERS, 4-6-535/11, 1 ST FLOOR, ESSEL CHAMBERS, KARANGALPADY, MANGALORE. PAN : AAJFP 0662J VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, MANGALORE. APPELLANT RESPONDENT ITA NOS.1468 & 1469/BANG/2012 ASSESSMENT YEARS : 2006-07 & 2007-08 THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, MANGALORE. VS. PRITHVI DEVELOPERS & BUILDERS, MANGALORE. PAN : AAJFP 0662J APPELLANT RESPONDENT ASSESSEE BY : SHRI NAVEEN TAO, ADVOCATE RESPONDENT BY : MS. PRISCILLA SINGSIT, CIT-III(DR) DATE OF HEARING : 01.07.2014 DATE OF PRONOUNCEMENT : 04.07.2014 ITA NOS.1436 &1437, 1468 & 1469/BANG/2012 PAGE 2 OF 15 O R D E R PER PRAMOD M. JAGTAP, ACCOUNTANT MEMBER THESE FOUR APPEALS, TWO FILED BY THE ASSESSEE AND TWO FILED BY THE REVENUE, ARE CROSS APPEALS WHICH ARE DIRECTED AGAIN ST THE ORDERS OF THE LD. CIT(APPEALS)-III, BANGALORE DATED 6.9.2012 FOR THE ASSESSMENT YEARS 2007- 08 & 2008-09. SINCE COMMON ISSUES ARE INVOLVED IN ALL THESE APPEALS, THE SAME HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSE D OF BY A SINGLE CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHI P FIRM, WHICH IS CARRYING ON THE BUSINESS AS BUILDERS AND REAL ESTAT E AGENTS. THE MAIN ACTIVITY OF THE ASSESSEE DURING THE YEAR UNDER CONS IDERATION WAS PROCURING THE LAND ON BEHALF OF A COMPANY VIZ., M/S. MOHTISHA M COMPLEXES PVT. LTD. [MCPL FOR SHORT] AND REGISTERING THE SAME IN THE NAME OF M/S. MOHTISHAM ESTATES PVT. LTD. [MEPL FOR SHORT]. 3. A SEARCH U/S. 132 OF THE ACT WAS CONDUCTED IN TH E CASE OF MCPL ON 13.2.2009. DURING THE COURSE OF SEARCH, INCRIMINAT ING DOCUMENTS WERE FOUND AND SEIZED, WHICH CONTAINED THE MOUS BETWEEN THE ASSESSEE AND MCPL FOR ACQUISITION OF LAND. A SURVEY OPERATION U /S. 133A OF THE ACT WAS ALSO CARRIED OUT AT THE BUSINESS PREMISES OF THE AS SESSEE ON 28.4.2009, DURING THE COURSE OF WHICH, INCRIMINATING DOCUMENTS WERE IMPOUNDED. THEREAFTER, NOTICES U/S. 153A R.W.S. 153C OF THE AC T WERE ISSUED BY THE AO ON 30.12.2009 FOR THE A.YS. 2007-08 & 2008-09, WHIC H WERE DULY SERVED ON ITA NOS.1436 &1437, 1468 & 1469/BANG/2012 PAGE 3 OF 15 THE ASSESSEE. IN THE PREVIOUS YEAR RELEVANT TO A.Y . 2007-08, THE TOTAL REGISTRATIONS OF LAND OF RS.5,36,67,000 WERE MADE B Y THE ASSESSEE AND IN THE ABSENCE OF ANY BOOKS OF ACCOUNTS REGULARLY MAIN TAINED FOR ITS BUSINESS, THE ASSESSEE ESTIMATED ITS INCOME FROM BUSINESS AT 10% OF THE TOTAL REGISTRATIONS, WHICH CAME TO RS.53,66,700. AFTER C LAIMING LOSS OF RS.51,45,479 ON ACCOUNT OF DEAL CANCELLATION AGAINS T THE INCOME SO ESTIMATED, THE TOTAL INCOME OF RS.2,21,221 WAS DECL ARED BY THE ASSESSEE IN THE RETURN OF INCOME FILED IN RESPONSE TO THE NO TICE ISSUED BY THE AO U/S. 153A R.W.S. 153C FOR THE A.Y. 2007-08. THEREAFTER, REVISED RETURN WAS FILED BY THE ASSESSEE WITHDRAWING ITS CLAIM FOR THE LOSS ON DEAL CANCELLATION, CLAIMING THE SAME FOR A.Y. 2008-09 ON THE BASIS OF DATE OF PAYMENT AND ACCORDINGLY, TOTAL INCOME OF RS.53,66,700 WAS DECLA RED IN THE REVISED RETURN FILED BY THE ASSESSEE. 4. IN THE PREVIOUS YEAR RELEVANT TO A.Y. 2008-09, T HE TOTAL REGISTRATIONS OF LAND OF RS.19,76,59,400 WERE MADE BY THE ASSESSE E AND IN THE ABSENCE OF ANY BOOKS OF ACCOUNT REGULARLY MAINTAINED FOR TH E SAID YEAR, THE ASSESSEE ESTIMATED ITS INCOME AT 20% OF THE TOTAL R EGISTRATIONS, WHICH CAME TO RS.3,95,31,880. AFTER CLAIMING THE LOSS ON DEAL CANCELLATION OF RS. 4,50,00,000 AGAINST THE INCOME SO ESTIMATED, NET LO SS OF RS.54,68,120 WAS DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME FO R THE A.Y. 2008-09. THEREAFTER, THE ASSESSEE ALSO FILED REVISED RETURN FOR A.Y. 2008-09 CLAIMING THE LOSS ON DEAL CANCELLATION OF RS.3,19,45,479 ON THE BASIS OF DATE OF ITA NOS.1436 &1437, 1468 & 1469/BANG/2012 PAGE 4 OF 15 PAYMENT AND ACCORDINGLY DECLARED THE TOTAL INCOME O F RS.75,86,401 IN THE REVISED RETURN. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ISSUE RELATING TO ESTIMATION OF INCOME OF THE ASSESSEE FROM BUSINESS AS A BUILDER AND REAL ESTATE AGENT WAS EXAMINED BY THE ASSESSING OFFICER AND ON SUCH EXAMINATION, HE FOUND THAT THE ASSESSEE COULD NOT E XPLAIN THE BASIS OF ESTIMATING ITS INCOME AT 10% & 20% OF THE TOTAL REG ISTRATIONS OF LAND MADE FOR THE A.YS. 2007-08 & 2008-09 RESPECTIVELY. ALTH OUGH THE AO INITIALLY PROPOSED TO ESTIMATE INCOME OF THE ASSESSEE AT 30% OF THE REGISTRATIONS MADE, HE REVISED THE SAME SUBSEQUENTLY TO 50% AND R EQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY ITS INCOME SHOULD NOT BE COMPUTED ON ESTIMATE BASIS @ 50% OF THE REGISTRATION MADE DURIN G BOTH THE YEARS UNDER CONSIDERATION. THE EXPLANATION OFFERED BY THE ASSE SSEE IN THIS REGARD WAS NOT FOUND ACCEPTABLE BY THE AO FOR THE REASONS ELAB ORATELY GIVEN IN THE ASSESSMENT ORDERS AND KEEPING IN VIEW THE SAID REAS ONS AS WELL AS RELYING ON THE INCRIMINATING DOCUMENTS FOUND DURING THE COU RSE OF SEARCH AS WELL AS DURING THE COURSE OF SURVEY, HE DETERMINED THE I NCOME OF THE ASSESSEE ON ESTIMATE BASIS AT RS.2,68,33500 AND RS.9,88,29,7 00 FOR THE A.YS. 2007- 08 & 2008-09 RESPECTIVELY BEING 50% OF THE REGISTRA TIONS MADE IN THESE TWO YEARS. 6. SINCE THE TOTAL INVESTMENT FOUND TO BE MADE IN T HE PREVIOUS YEAR RELEVANT TO A.Y. 2007-08 AT RS.2,89,75,467 WAS MORE THAN THE INCOME OF ITA NOS.1436 &1437, 1468 & 1469/BANG/2012 PAGE 5 OF 15 RS.2,68,33,500 ESTIMATED BY HIM, ADDITION OF RS.2,8 9,75,467 WAS MADE BY THE AO TO THE TOTAL INCOME OF THE ASSESSEE U/S. 69 OF THE ACT WITHOUT MAKING ANY SEPARATE ADDITION ON ACCOUNT OF BUSINESS INCOME ESTIMATED AT RS.2,68,33,500. ACCORDINGLY THE TOTAL INCOME OF TH E ASSESSEE FOR THE A.YS. 2007-08 AND 2008-09 WAS COMPUTED BY THE AO AT RS.2 ,89,75,467 AND RS.9,96,83,350 IN THE ASSESSMENT COMPLETED U/S. 153 C R.W.S. 143(3) OF THE ACT VIDE ORDERS DATED 27.12.2010 AFTER DISALLOWING THE CLAIM OF THE ASSESSEE FOR LOSS ON DEAL CANCELLATIONS. 7. AGAINST THE ORDERS PASSED BY THE AO U/S. 153C R. W.S. 143(3) OF THE ACT FOR BOTH THE YEARS UNDER CONSIDERATION, THE APP EALS WERE PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(APPEALS) CHALLENGIN G THE VALIDITY OF THE SAID ASSESSMENTS ON VARIOUS GROUNDS AS WELL AS DISPUTING THE ADDITIONS MADE THEREIN BY ESTIMATING ITS BUSINESS INCOME ON A HIGH ER SIDE. 8. BY HER IMPUGNED ORDERS, THE LD. CIT(APPEALS) DIS POSED OF THE APPEALS FILED BY THE ASSESSEE, WHEREBY SHE DISMISSE D THE GROUNDS RAISED BY THE ASSESSEE CHALLENGING THE VALIDITY OF ASSESSM ENTS AS NOT PRESSED. AS REGARDS THE ADDITIONS MADE BY THE AO BY ESTIMATI NG THE BUSINESS INCOME OF THE ASSESSEE BY APPLYING A HIGHER NET PRO FIT RATE OF 50% FOR BOTH THE YEARS UNDER CONSIDERATION AS AGAINST 10% & 20% DECLARED BY THE ASSESSEE, THE LD. CIT(A) HELD THAT THE ESTIMATION O F ASSESSEES INCOME BY APPLYING A NET PROFIT RATE OF 30% WOULD BE FAIR AND REASONABLE. THE ITA NOS.1436 &1437, 1468 & 1469/BANG/2012 PAGE 6 OF 15 REASONS GIVEN BY THE CIT(A) TO COME TO THIS CONCLUS ION, AS GIVEN IN THE IMPUGNED ORDERS ARE REPRODUCED BELOW:- THE BASIC ADDITION MADE BY THE A.O. HAS BEEN DON E ON THE BASIS OF CERTAIN SCRIBBLINGS MADE ON VARIOUS CHEQUE BOOKS AND CHEQUE LEAVES. THE A.O. HAS NOT BROUGHT ANY DOCUMEN TARY EVIDENCES TO SUPPORT THE ADDITIONS OR ANY SEIZED DO CUMENT THAT HAS BEEN BROUGHT ON RECORD BY THE A.O. TO PROVE THA T THESE TRANSACTIONS HAVE BEEN MADE. IN CONTRAST TO IT, THE ASSESSEE HAS GIVEN ALL THE DETAILS OF THE RECEIPTS AND EXPENSES MADE ALONG WITH DOCUMENTARY EVIDENCES ALSO. SINCE THERE ARE CERTAIN EXPENSES THAT HAS NOT BEEN FULLY VOUCHED BY THE ASSESSEE THAT DOE S NOT MEAN THAT THE EXPENSES WOULD NOT HAVE TAKEN PLACE IN THE PROCESS OF BUSINESS. THE BUSINESS OF THE ASSESSEE IS OF LAND P ROCUREMENT WHICH ENTAILS LOT OF EXPENSES WHICH ARE TO BE MADE IN CASH FOR WHICH THE ASSESSEE HAS NOT BEEN ABLE TO PROVIDE DOC UMENTARY EVIDENCE. THE A.O. HAD HIMSELF PROPOSED TO TAX IT A T 30%, HOWEVER AFTERWARDS HE DECIDED TO TAX IT AT 50%. KEE PING IN VIEW THE DETAILS FURNISHED, THE MOUS GIVEN THE PROFIT SH OULD BE CALCULATED AT 30% OF THE TURNOVER. 9. AS REGARDS THE ADDITION MADE BY THE AO IN A.Y. 2 007-08 ON ACCOUNT OF UNEXPLAINED INVESTMENT ALLEGEDLY MADE BY THE ASS ESSEE TO THE EXTENT OF RS.2.89 CRORES, THE LD. CIT(A) ACCEPTED THE CONTENT ION OF THE ASSESSEE THAT ALL THESE INVESTMENTS WERE MADE IN THE VARIOUS LAND S OUT OF ADVANCES RECEIVED FROM VARIOUS GROUPS. SHE ACCORDINGLY DIRE CTED THE AO TO COMPUTE THE INCOME OF THE ASSESSEE FOR THE A.Y. 2007-08 BY APPLYING THE NET PROFIT RATE OF 30% TO THE TOTAL TURNOVER. 10. AS REGARDS A.Y. 2008-09, THE LD. CIT(A) FOUND M ERIT IN THE CONTENTIONS RAISED ON BEHALF OF THE ASSESSEE REGARD ING CANCELLATION OF CERTAIN DEALS RESULTING INTO LOSSES AND DIRECTED TH E AO TO ALLOW THE SAME ITA NOS.1436 &1437, 1468 & 1469/BANG/2012 PAGE 7 OF 15 AFTER VERIFICATION. SHE ACCORDINGLY DIRECTED THE AO TO DETERMINE THE INCOME OF THE ASSESSEE FOR A.Y. 2008-09 BY APPLYING THE NE T PROFIT RATE OF 30% TO THE MODIFIED TURNOVER AFTER ALLOWING THE LOSS CLAIM ED BY THE ASSESSEE ON DEAL CANCELLATION. 11. THE APPEALS FILED BY THE ASSESSEE FOR BOTH THE YEARS UNDER CONSIDERATION I.E., A.YS. 2007-08 & 2008-09 WERE TH US PARTLY ALLOWED BY THE LD. CIT(A) BY HER IMPUGNED ORDERS AND AGGRIEVED BY THE SAME, THE ASSESSEE AND REVENUE, BOTH ARE IN APPEALS BEFORE TH E TRIBUNAL. 12. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. 13. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET , HAS RAISED THE PRELIMINARY OBJECTION THAT THE LEGAL ISSUE RAISED B EFORE THE LD. CIT(APPEALS), CHALLENGING THE VALIDITY OF ASSESSMENTS MADE BY THE AO U/S. 153C R.W.S. 143(3) BY TAKING SPECIFIC GROUNDS, WAS NEVER GIVEN UP ON BEHALF OF THE ASSESSEE AND IT IS NOT A CASE WHERE THE SAME WAS N OT PRESSED BY THE ASSESSEE, AS STATED BY THE LD. CIT(A) IN HER IMPUG NED ORDERS. HE HAS ALSO FILED AN AFFIDAVIT OF SHRI P. NARENDRA PAI, CHARTER ED ACCOUNTANT, WHO APPEARED BEFORE THE LD. CIT(A) AS THE AUTHORISED RE PRESENTATIVE OF THE ASSESSEE. THE CONTENTS OF THE SAID AFFIDAVIT ARE A S UNDER:- 1. I STATE THAT I AM CHARTERED ACCOUNTANT BY PROF ESSION. I WAS THE AUTHORIZED REPRESENTATIVE APPEARED ON BEHALF OF THE ASSESSE,IE., M/S PRITHVI DEVELOPERS & BUILDERS BEFO RE THE COMMISSIONER OF INCOME TAX APPEALS - VI, BANGALORE IN CASE ITA NOS.1436 &1437, 1468 & 1469/BANG/2012 PAGE 8 OF 15 ITA NO. 365 TO 367/2010-11. THUS I AM WELL CONVERSA NT OF THE FACTS AND CIRCUMSTANCES OF THE MATTER. THEREFORE I AM SWEARING THIS AFFIDAVIT. 2. I STATE THAT THE ASSESSEE HAD CHALLENGED THE OR DER OF ASSESSMENT U/S 153A R.W.S 153C OF THE I.T.ACT AND R AISED ONE OF THE GROUNDS THAT THE MANDATORY CONDITIONS TO INVOKE THE JURISDICTION UNDER SECTION 153C OF THE ACT DID NOT EXIST. BUT THE LEARNED CIT(A) IN ITS ORDER DATED 06/09/2012 HAD MA DE AN ERRONEOUS FINDING THAT WE HAVE NOT PRESSED THIS GRO UND AND SHE HAS HENCE DISMISSED THIS GROUND AS NOT PRESSED. 3. I STATE THAT WE HAD RAISED THIS LEGAL GROUND IN OUR REVISED GROUNDS OF APPEAL AND HAVE ALSO FILED OUR WRITTEN SUBMISSION/ARGUMENT ON THE SAME. WE HAD IN NO STRET CH OF IMAGINATION HAD GIVEN UP THIS LEGAL GROUND OF CONTE NTION. 4. THEREFORE IT IS PRAYED THAT THE LEGAL GROUNDS R AISED BY THE ASSESSEE BE ADJUDICATED BY THIS HONBLE INCOME TAX TRIBUNAL IN THE INTEREST OF JUSTICE AND EQUITY. 14. ALTHOUGH THE LD. DR HAS RAISED OBJECTION TO THE STAND TAKEN BY THE ASSESSEE ON THIS PRELIMINARY ISSUE, KEEPING IN VIEW THE SPECIFIC AVERMENT MADE BY THE LD. CIT(A) IN HER IMPUGNED ORDERS THAT THE LEGAL ISSUE RELATING TO VALIDITY OF ASSESSMENTS WAS NOT PRESSED BY THE A SSESSEE, WE FIND THAT THE REVISED GROUNDS OF APPEAL WERE FILED BY THE ASS ESSEE BEFORE THE LD. CIT(A) AND THE SAME, AS REPRODUCED BY THE LD. CIT(A ) ON PAGES 2 & 3 OF HER IMPUGNED ORDERS, SPECIFICALLY INCLUDED GROUND N OS. 3 TO 6, WHICH CHALLENGED THE VALIDITY OF ASSESSMENTS MADE BY THE AO ON VARIOUS GROUNDS. THE SAID GROUNDS ARE REPRODUCED HEREUNDER :- 3. THE ORDER OF ASSESSMENT IS BAD IN LAW AS THE N OTICE ISSUED U/S. 153A R.W.S 153C IS VOID-AB-INTIO AS THE MANDAT ORY CONDITIONS ITA NOS.1436 &1437, 1468 & 1469/BANG/2012 PAGE 9 OF 15 TO INVOKE THE JURISDICTION UNDER SECTION 153C OF TH E ACT DID NOT EXIST. 4. THE ASSESSMENT IS BAD IN LAW AS THE MANDATORY C ONDITIONS OF RECORDING SATISFACTION NOT COMPLIED WITH TO INVO KE THE JURISDICTION UNDER SECTION 153C OF THE ACT AND CONS EQUENTLY THE ASSESSMENT MADE IS BAD IN LAW FOR WANT OF REQUISITE JURISDICTION. 5. THE IMPUGNED ADDITION IN THE ASSESSMENT U/S. 153 C R.W.S 143(3) IS BAD IN LAW AS THE ENTIRE ASSESSMENT IS MA DE ON THE BASIS OF THE DOCUMENTS FOUND AT THE TIME OF SURVEY U/S.13 3A AND NOT ON THE BASIS OF THE DOCUMENTS FOUND AND SEIZED AT THE TIME OF SEARCH U/S.132 OF THE ACT, USING OF DOCUMENTS COLLECTED DU RING SURVEY FOR THE SEARCH PROCEEDINGS IS NOT PERMISSIBLE UNDER LAW. 6. WITHOUT PREJUDICE, THE ORDER OF ASSESSMENT IS F URTHER BAD IN LAW, AS THE ASSESSMENT AND ADDITION WERE NOT SUP PORTED BY THE SEIZED MATERIALS FOUND AT THE TIME OF SEARCH AND IS MADE ON ESTIMATION BASIS. 15. IT IS ALSO OBSERVED THAT NOT ONLY THE GROUNDS A S ABOVE WERE RAISED BY THE ASSESSEE BEFORE THE LD. CIT(A) CHALLENGING T HE VALIDITY OF ASSESSMENTS ON DIFFERENT GROUNDS, BUT EVEN DETAILED SUBMISSIONS WERE MADE IN SUPPORT THEREOF, WHICH, AS REPRODUCED BY TH E CIT(A) IN HER IMPUGNED ORDERS, WERE AS UNDER:- 7. THE ORDER OF ASSESSMENT IS BAD IN LAW AS THE NOT ICE ISSUED U/S. 153A R.W.S 153C IS VOID-AB-INTIO, AS THE MANDA TORY CONDITIONS TO INVOKE THE JURISDICTION UNDER SECTION 153C OF THE ACT DID NOT EXIST 7.1. IT IS SUBMITTED THAT A SEARCH WAS CONDUCTED I N THE CASE OF M/S. MOHTISHAM COMPLEXES PVT. LTD., ON 13.02.2009 A ND 17.03.2009, DURING THE SEARCH SOME DOCUMENT PERTAIN ING TO THE APPELLANT HEREIN WERE FOUND AND IMPOUNDED. SUBSEQUE NTLY A SURVEY U/S. 133A OF THE ACT WAS CONDUCTED IN THE BU SINESS PREMISES OF THE APPELLANT ON 28.04.2009, SINCE DOCU MENTS WERE ITA NOS.1436 &1437, 1468 & 1469/BANG/2012 PAGE 10 OF 15 FOUND, WHICH AS PER THE ASSESSING OFFICER WAS INCRE MENTAL IN NATURE, NOTICE U/S. 153A R.W.S 153C DATED 30.12.200 9 WAS ISSUED ON THE APPELLANT. 7.2. IT IS SUBMITTED THAT THE IMPUGNED NOTICE WAS ISSUED PURSUANT TO A SURVEY U/S. 133A AND BASED ON THE ALL EGED INCREMENTAL DOCUMENT IMPOUNDED IN THE SURVEY. IT IS SUBMITTED THAT THOUGH THERE WAS SEARCH IN CASE M/S. MOHTISHAM COMPLEXES PVT. LTD., THERE WAS NO IMMEDIATE ACTION INITIATED AGAINST THE APPELLANT, AS THERE WAS NO INCREMENTAL DOCUMENTS FO UND IN THE SEARCH TO ARRIVE AT A SATISFACTION TO INITIATE AND CONTINUE WITH THE SEARCH PROCEEDING U/S. 153C. IT IS ONLY AFTER THE S URVEY THAT THE DEPARTMENT HAS ISSUED NOTICE AGAINST THE APPELLANT HEREIN. IF AT ALL THE DEPARTMENT WAS SATISFIED WITH REGARDS TO THE FI NDING AGAINST THE APPELLANT IN THE SEARCH CONDUCTED THEY SHOULD H AVE ISSUED THE NOTICE BASED ON THOSE DOCUMENTS ITSELF, THAN CONDUC TING THE SURVEY AGAINST THE APPELLANT. THUS THE LEARNED ASSE SSING OFFICER HAS ERRED IN INVOKING AND CONTINUING WITH THE PROVI SIONS OF SECTION 153C PURSUANT TO THE SURVEY U/S. 133A AGAIN ST THE APPELLANT HEREIN. THUS, IT IS SUBMITTED THAT THE AS SESSING OFFICER WAS NOT SATISFIED WITH THE FINDING IN THE SEARCH TO INVOKE THE JURISDICTION UNDER SECTION 153C, 8. THE MANDATORY CONDITIONS OF RECORDING SATISFACTI ON NOT COMPLIED WITH TO INVOKE THE JURISDICTION UNDER SECT ION 153C OF THE ACT. 8.1 IT IS SUBMITTED THAT REASONS FOR ISSUE OF NOTI CE U/S. 153A R.W.S 153C OF THE ACT HAVE NOT BEEN GIVEN TO THE AP PELLANT, THE APPELLANT HAS REASONS TO BELIEVE THAT THE REASONS F OR THE ISSUE OF NOTICE U/S. 153A R.W.S 153C HAVE NOT BEEN RECORDED. THUS THE NOTICE IS ISSUED IN CONTRAVENTION OF THE PROVISION OF SECTION 153C. RELIANCE IS ALSO PLACED ON THE PARITY OF REASONS OF THE APEX COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD. VS. INC OME-TAX OFFICER & OTHERS REPORTED IN 259 ITR 19. 8.2 IT IS FURTHER SUBMITTED THAT, THERE IS NO SATI SFACTION RECORDED BY THE LEARNED ASSESSING OFFICER THAT THE UNDISCLOSED INCOME DISCOVERED DURING SEARCH BELONGED TO THE APP ELLANT HEREIN. THE BARE READING OF SECTION 153C CLEARLY SH OWS THAT THE SEARCH PROVISIONS CAN BE INVOKED ONLY IF ASSESSING OFFICER IS SATISFIED THAT ANY UNDISCLOSED INCOME BELONGS TO SO ME PERSON OTHER THAN THE ONE WITH RESPECT TO WHOM SEARCH WAS MADE UNDER ITA NOS.1436 &1437, 1468 & 1469/BANG/2012 PAGE 11 OF 15 SECTION 132, SUCH SATISFACTION MUST OUGHT TO HAVE B EEN ARRIVED AT BY THE ASSESSING OFFICER, BEFORE INVOKING THE PROVI SIONS OF SECTION 153C, SOLELY ON THE BASIS OF MATERIAL FOUND IN THE COURSE OF SEARCH OF OTHER PERSON AND ANY MATERIAL COMING I NTO THE POSSESSION OF THE ASSESSING OFFICER AFTER INVOKING SURVEY U/S. 133A CANNOT BE CONSIDERED FOR EXERCISING SUCH JURIS DICTION. 8.3 IT IS FURTHER SUBMITTED THAT IN FACT, EVEN THE ASSESSMENT ORDER PASSED IN THE CASE OF M/S. MOHTISHAM COMPLEXE S PVT. LTD DOES NOT SHOW ANY SATISFACTION THAT ANY UNDISCLOS ED INCOME BELONGS TO THE APPELLANT HEREIN. 8,4 IN THE ABSENCE OF SUCH SATISFACTION, THE ASSES SMENT MADE ON ANY OTHER PERSON WOULD, BE ILLEGAL AND VOID-AB-I NITIO SINCE JURISDICTION TO ASSESS OTHER PERSON CAN BE EXERCISE D VALIDLY ONLY IN ACCORDANCE WITH PROVISIONS OF SECTION 153C. RELI ANCE IS PLACED ON THE DECISION OF MANISH MAHESHWARI VS. ACIT & ANO THER REPORTED IN 289 ITR 341 (S.C), WHEREIN THE HONBLE SUPREME COURT HAS HELD THAT RECORDING OF SATISFACTION BY TH E AO OF THE SEARCHED PERSON THAT ANY UNDISCLOSED INCOME BELONGS TO ANY PERSON, OTHER THAN THE PERSON SEARCHED, WAS A CONDI TION PRECEDENT. IT WAS FURTHER HELD THAT THE AO MUST REA CH A CLEAR CONCLUSION THAT GOOD GROUND EXISTS FOR THE AO OF TH E THIRD PERSON TO INITIATE PROCEEDINGS AS MATERIAL BEFORE HIM SHOW S OR WOULD ESTABLISH UNDISCLOSED INCOME OF A THIRD PERSON. T HERE MUST BE RATIONAL AND TANGIBLE NEXUS BETWEEN THE MATERIAL FO UND IN SEARCH AND THE SATISFACTION. 8.5 RELIANCE IS PLACED ON THE DECISION OF CIT VS. RADHEY SHYAM BANSAL (DELHI HIGH COURT) 337 ITR 217. 8.6 IT WAS HELD THAT THE AO MAKING ADDITION OF CER TAIN SUM IN THE INCOME OF ASSESSEE, ON THE BASIS OF THE LOOSE P APERS FOUND DURING SEARCH OPERATION IN PREMISES OF SOME OTHER P ERSON WITHOUT RECORDING SATISFACTION SUCH ACTION OF AO WAS BAD IN LAW. LUNAWAT JAYANT MANIKLAL V. DY. CIT (2008) 297 ITR (AT) 155 (PUNE) 8.7 RELIANCE IS PLACED ON THE DECISION IN 333 ITR 315 (DEL) 337 ITR 258 (RAJ) [MEANING OF SATISFACTION 337 ITR 217 (ALL)] WHEREIN IT WAS HELD THAT IT IS THE DUTY OF AO TO RE CORD SATISFACTION THAT UNDISCLOSED INCOME DISCOVERED DURING SEARCH BE LONGED TO THIRD PERSON. ITA NOS.1436 &1437, 1468 & 1469/BANG/2012 PAGE 12 OF 15 9. THE IMPUGNED ADDITION IN THE ASSESSMENT U/S.153C R.W.S 143(3) IS BAD IN LAW AS THE ENTIRE ASSESSMENT IS MA DE ON THE BASIS OF THE DOCUMENTS FOUND AT THE TIME OF SURVEY U/S.13 3A AND NOT ON THE BASIS OF THE DOCUMENTS FOUND AND SEIZED AT THE TIME OF SEARCH U/S.132 OF THE ACT : 9.1 IT IS SUBMITTED THAT, IT IS STATED N THE ASSES SMENT ORDER THAT THE SEARCH U/S.132 OF THE ACT WAS CONDUCTED ON 13 .02.2009 AND 17.03.2009 IN THE CASE OF M/S. MOHTISHAM COMPLEXES PVT. LTD., AND INCRIMINATING DOCUMENT MARKED AS A/MCPL/64 DATE D 13.02.2009 AND A3/MCPL/16 DATED 17.03.2009 WERE SEI ZED. IT IS FURTHER STATED IN THE ASSESSMENT ORDER THAT THESE S EIZED DOCUMENTS CONTAINED THE MOU BETWEEN THE ASSESSEE M/S. PRITHVI DEVELOPERS AND BUILDERS, MANGALORE AND M/S. MOHTISH AM COMPLEXES PVT. LTD., MANGALORE FOR ACQUISITION OF L AND. A SURVEY U/S. 133A WAS ALSO CONDUCTED IN THE ASSESSEES BUSI NESS PREMISES ON 28.04.2009 AND INCRIMINATING DOCUMENTS WERE IMPO UNDED. 9.2 IT IS SUBMITTED THAT THE ENTIRE ASSESSMENT MAD E IN THE IMPUGNED ORDER IS BASED ON THE DOCUMENTS IMPOUNDED IN SURVEY U/S.133A CONDUCTED ON THE BUSINESS PREMISES OF THE APPELLANT ON 28.04.2009 AND NOT ON THE BASIS OF THE DOCUMENTS FO UND AND SEIZED AT THE TIME OF SEARCH U/S.132 CONDUCTED AT M /S. MOHTISHAM COMPLEXES PVT LTD ON 13.02.2009 & 17.03.2009. IT IS SUBMITTED THAT USING OF SURVEY DOCUMENTS FOR THE SEARCH PROCE EDINGS IS NOT PERMISSIBLE UNDER LAW. RELIANCE IS PLACED ON THE DE CISION OF THE CIT V. G. K. SENNIAPPAN (284 ITR 220), WHEREIN IT W AS HELD THE MATERIALS OR EVIDENCE WHICH HAS BEEN GATHERED DURIN G THE SEARCH COULD BE TAKEN INTO CONSIDERATION AND NOT THE MATER IAL COLLECTED DURING THE SURVEY UNDER SECTION 133A. ANY OTHER MAT ERIAL CANNOT FORM BASIS FOR COMPUTATION OF UNDISCLOSED INCOME. R EFERENCE IS DRAWN TO PARA 6.13 OF ASSESSMENT ORDER WHEREIN A CL EAR FINDING IS DRAWN THAT THE DOCUMENTS WERE IMPOUNDED FROM THE BU SINESS PREMISES OF THE ASSESSEE. THUS THE IMPUGNED ADDITIO N IN THE ASSESSMENT U/S.153C R.W.S 143(3) IS BAD IN LAW. 10. WITHOUT PREJUDICE, THE ORDER OF ASSESSMENT IS FURTHER BAD IN LAW, AS THE ASSESSMENT AND ADDITION WERE NOT SUP PORTED BY THE SEIZED MATERIALS FOUND AT THE TIME OF SEARCH AND IS MADE ON ESTIMATION BASIS . 10.1 IT IS SUBMITTED THAT THE ASSESSMENT IS MADE ON ESTIMATION BASIS AND NOT ON THE BASIS OF INCRIMINATING DOCUMEN TS FOUND AND ITA NOS.1436 &1437, 1468 & 1469/BANG/2012 PAGE 13 OF 15 SEIZED AT THE TIME OF SEARCH. ESTIMATION IS BAD IN SEARCH PROCEEDINGS, ASSESSMENT AND ADDITION OUGHT TO HAVE BEEN MADE BASED ON THE INCREMENTAL DOCUMENTS FOUND AND SEIZED AT THE TIME OF SEARCH. IN THE INSTANT CASE THE ASSESSING OFFICE R MADE THE ADDITION ON ESTIMATION BASIS AND THAT TOO ON THE DO CUMENTS IMPOUNDED AT THE TIME OF SURVEY, AND NOT ON THE BAS IS OF DOCUMENTS FOUND AND SEIZED AT THE TIME OF SEARCH. T HE ASSESSING OFFICERS ESTIMATION IS WITHOUT ANY FACTUAL MATERIA L ARISING OUT OF SEARCH. 10.2 RELIANCE IS PLACED ON THE DECISION OF JURISDI CTIONAL HIGH COURT IN THE CASE OF CIT V SMT. SHEELA S. KOTECHA IN ITA NO. 1099/2006 DATED 22.11.2011. 10.3 RELIANCE IS ALSO PLACED ON THE DECISION OF JU RISDICTIONAL HIGH COURT IN THE CASE OF CIT V/S GOWRI GOPAL TEXTILE PROCESSING PVT. LTD ., IN ITA 3051 OF 2005 DATED 19.09.2011. 10.4 IT IS SETTLED LAW THAT ADDITION IN SEARCH CAS ES NEEDS TO BE SUPPORTED BY THE SEIZED MATERIALS FOUND AT THE TIME OF SEARCH. ABSOLUTELY, NO MATERIAL SEIZED IN THE SEARCH SHOWS THAT IT IS UNDISCLOSED INCOME. IT IS CLEAR THAT THE AFORESAID ADDITION IS MADE ON THE BASIS OF THE SCRIBBLING FOUND IN THE CHEQUE BOOK COUNTER FOILS FOUND IN THE SURVEY WHICH WAS CONDUCTED SUBSE QUENT TO THE SEARCH PROCEEDINGS. THE ASSESSMENT IS NOT ON THE BA SIS OF THE INFORMATION SECURED FROM THE INCRIMINATING MATERIAL BUT ON ASSUMPTION AND PRESUMPTION. THUS, THE ADDITION IN A SSESSMENT IS BAD IN LAW ON THE FACTS AND CIRCUMSTANCES OF THE CA SE. RELIANCE IS PLACED ON THE DECISION OF JURISDICTIONAL HIGH COURT IN CASE OF CIT VS SHRI SHYAM SUNDAR SIPANI IN ITA NO. 10/2006 DATED 14.09.2011 AND ITA NO. 1295/2006 DATED 30.11.2011. 10.5 IN FACT, THE LEARNED ASSESSING OFFICER HAS MA DE ADDITION AS UNEXPLAINED INVESTMENTS OF RS. 2,89,75,467/- BY COM PARING THE ASSESSING OFFICERS OWN DETERMINED ESTIMATED INCOME WITH THAT OF THE DETERMINED UNEXPLAINED INVESTMENT AND BROUGHT T O TAX THE HIGHER OF THE BOTH, WHICH IS NOT PERMISSIBLE IN SEA RCH PROCEEDINGS. HENCE, THE ASSESSMENT IS PURELY ON THE BASIS OF SURMISES AND ESTIMATE AND IT IS NOT A CASE OF ANY I NCRIMINATING MATERIAL SEIZED DURING THE COURSE OF SEARCH. THUS I T IS SUBMITTED THAT THE ASSESSING OFFICER HAS ERRED IN MAKING THE ADDITION ON THE BASIS OF ESTIMATION AND SURMISES, CONSEQUENTLY THE ASSESSMENT IS BAD IN LAW ON THE FACTS AND CIRCUMSTANCES OF THE CA SE. ITA NOS.1436 &1437, 1468 & 1469/BANG/2012 PAGE 14 OF 15 10.6. FURTHER RELIANCE IS PLACED ON THE DECISION O F CIT V/S. ASHIM KRISHNA MONDAL , 270 ITR 160 (CAL.) FOR THE PROPOSITION THAT ESTIMATION CANNOT BE DONE IN CASE OF SEARCH AS SESSMENT. 16. IN OUR OPINION, THE REVISED GROUNDS OF APPEAL R AISED BY THE ASSESSEE BEFORE THE LD. CIT(A) AND THE DETAILED SUBMISSIONS MADE IN SUPPORT THEREOF, WHICH HAVE BEEN DULY TAKEN NOTE OF BY THE LD. CIT(A ) IN HER IMPUGNED ORDERS, MAKE IT ABUNDANTLY CLEAR THAT THE ISSUE REL ATING TO VALIDITY OF ASSESSMENTS MADE BY THE AO WAS NOT ONLY SPECIFICALL Y RAISED BY THE ASSESSEE IN THE APPEALS FILED BEFORE THE LD. CIT(A) , BUT THE SAME WAS ALSO VEHEMENTLY ARGUED BY MAKING A DETAILED SUBMISSION A ND THIS POSITION, WHICH IS CLEARLY EVIDENT FROM THE IMPUGNED ORDERS O F THE LD. CIT(A), SUPPORTS THE STAND OF THE ASSESSEE THAT THE LEGAL I SSUE CHALLENGING THE VALIDITY OF ASSESSMENTS WAS NOT GIVEN UP BY THE ASS ESSEE. EVEN OTHERWISE, THE ISSUE RELATING TO VALIDITY OF ASSESS MENTS IS A LEGAL ISSUE AND THE ASSESSEE IS ENTITLED TO RAISE THE SAME FOR THE FIRST TIME EVEN BEFORE THE TRIBUNAL, AS HELD BY THE HONBLE SUPREME COURT IN T HE CASE OF NATIONAL THERMAL POWER CORPORATION LTD. V. CIT , [1998] 229 ITR 383 (SC). 17. WE, THEREFORE, ADMIT THE STAND OF THE ASSESSEE ON THIS ISSUE AND SINCE THIS ISSUE GOES TO THE ROOT OF THE MATTER AND THE SAME HAS NOT BEEN DECIDED BY THE LD. CIT(A) DESPITE HAVING BEEN SPECI FICALLY RAISED BY THE ASSESSEE, WE REMIT THE SAME TO THE FILE OF THE LD. CIT(A) FOR DECIDING IT ON ITA NOS.1436 &1437, 1468 & 1469/BANG/2012 PAGE 15 OF 15 MERITS IN ACCORDANCE WITH THE LAW, AFTER TAKING INT O CONSIDERATION THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE. 18. KEEPING IN VIEW OUR DECISION RENDERED ABOVE, RE MITTING THE MATTER BACK TO THE LD. CIT(A) FOR DECIDING THE PRELIMINARY ISSUE INVOLVED IN THE CASE OF THE ASSESSEE RELATING TO VALIDITY OF ASSESSMENTS FOR BOTH THE YEARS UNDER CONSIDERATION; THE OTHER ISSUES INVOLVED IN THE APP EALS OF THE ASSESSEE AS WELL AS OF THE REVENUE ARE KEPT OPEN WITH LIBERTY T O BOTH THE SIDES TO RAISE THE SAME AGAIN BY FILING FRESH APPEALS BEFORE THE T RIBUNAL DEPENDING UPON THE DECISION OF THE LD. CIT(A) ON THE PRELIMINARY I SSUE. 19. IN THE RESULT, ALL THE FOUR APPEALS ARE DISPOSE D OF AS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF JULY , 2014 . SD/- SD/- ( N.V. VASUDEVAN ) ( PRAMOD M. JAGTAP) JUDICIAL MEMBER ACCOUNT ANT MEMBER BANGALORE, DATED, THE 4 TH JULY , 2014 . /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. C IT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR/ SENIOR PRIVATE SECRETARY ITAT, BANGALORE.