Abdul Rahim, Hyderabad V. DCIT, Circle-3, Hyderabad, Hyderabad

ITA 1557/HYD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6090 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 28-02-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 09-10-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A SITARAMA RAO
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Sale consideration of property below Jantri Value; Question of law; Fair market value; Documents seized
• Section: 143(3); 142(1); 132

Judgement Text

ITA NO 1557 OF 2014 ABDUL RAHIM HYDERABAD PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.1557/HYD/2014 (ASSESSMENT YEAR: 2008-09) SHRI ABDUL RAHIM HYDERABAD PAN: AHUPR 5929 A VS DCIT, CENTRAL CIRCLE 3 HYDERABAD FOR ASSESSEE : SHRI P. MURALI MOHAN RAO FOR REVENUE : SHRI A. SITARAMA RAO, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y2008-09. IN TH IS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE ORDER OF T HE CIT (A) IN UPHOLDING THE ASSESSMENT MADE BY THE AO U/S 143(3) R.W.S. 153C OF THE I.T. ACT. ALONG WITH FORM 36, THE ASSESSEE H AS FILED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD.CIT (APPEALS) ERRED BOTH IN LAW AND ON FACTS IN UPHOLDING THE ASSESSMENT MADE U/S 143(3) R.W.S 153C OF THE IT ACT BY THE LD.AO. 2. THE LD.CIT(A) OUGHT TO HAVE ANNULLED THE ASSESSMENT ORDER PASSED U/S 143(3) R.W.S 153C OF THE ACT., AS THE MATERIAL FOUND IN SEARCH IS NOT AN INCRIMINATING DOCUMENT BUT AN OPEN AND PUBLIC DOCUMENT. 3. THE LD.CIT ERRED IN CONFIRMING THE ADDITION MADE BY THE LD.AO OF RS. 3,04,60,000/- TOWARDS THE LONG TERM CAPITAL GAIN. DATE OF HEARING : 28.02.2017 DATE OF PRONOUNCEMENT : 15.03.2017 ITA NO 1557 OF 2014 ABDUL RAHIM HYDERABAD PAGE 2 OF 6 4. THE LD.CIT ERRED IN UPHOLDING THE ORDER OF THE LD.AO BY CONSIDERING THE FAIR MARKET VALUES INSTEAD OF CONSIDERING THE SALE PROCEEDS RECEIVED BY THE ASSESSEE AS PER THE AGREEMENT FOR THE COMPUTATION OF LONG TERM CAPITAL GAIN. 5. THE LD.CIT (A) ERRED IN UPHOLDING THE ADDITIONS MADE BY THE LD.AO TO THE CAPITAL GAINS BY ADOPTING THE FMV AS PER REGISTRAR LAWS. 6. THE LD.CIT(A) OUGHT TO HAVE DIRECTED THE LD.AO TO REFER TO THE ASSET FOR VALUATION TO THE DVO. 7. THE ASSESSEE MAY ADD, ALTER OR MODIFY OR SUBSTITUTE ANY OTHER POINT TO THE GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 2. IN ADDITION THERETO, THE ASSESSEE HAS ALSO FILED THE FOLLOWING ADDITIONAL GROUNDS OF APPEAL CHALLENGING THE JURISDICTION OF THE AO INVOKING THE PROVISIONS OF SECTION 153C O F THE ACT FOR THE A.Y 2003-04, THOUGH THERE WAS NO SATISFACTION RE CORDED BY HIM AS WELL AS BY THE AO HAVE JURISDICTION OVER THE COMPANY SEARCHED. 8. WE WOULD LIKE TO SUBMIT THAT AS PER THE RATION LAID DOWN BY THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF NATIONAL THERMAL POWER CO. LTD V. CIT (1998) 229 ITR 383 (SC) THE ITAT HAS JURISDICTION TO EXAMINE THE QUESTION OF LAW WHICH THOUGH NOT AROSE BEFORE THE AO BUT AROSE BEFORE THE IT AT FOR THE FIRST TIME. 9. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE AO ERRED IN NOT FOLLOWING THE PROCEDURE LAID DOWN UNDER THE PROVISIONS OF SECTION 50C(2) OF THE ACT. 10. THE LD. C!T(A) ERRED IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION 153C OF THE ACT FOR THE ASSESSMENT YEAR 2003-04, THERE BEING NO SATISFACTION RECORDED BY HIM AS WELL AS BY THE ASSESSING ITA NO 1557 OF 2014 ABDUL RAHIM HYDERABAD PAGE 3 OF 6 OFFICER HAVING JURISDICTION OVER THE COMPANY SEARCHED. 11. THE LD. CIT(A) OUGHT TO HAVE ANNULLED THE ORDER OF THE ASSESSING OFFICER APPRECIATING THAT INVOKING OF THE PROVISIONS U/S 153C WITHOUT RECORDING SATISFACTION BY HIM AS WELL AS BY THE ASSESSING OFFICER HAVING JURISDICTION OVER THE SEARCHED PARTY BECOMES INVALID AS HELD BY THE HON'BLE A.P HIGH COURT IN THE CASE OF CIT VS. M/S SHETTYS PHARMACEUTICALS & BIOLOGICALS LTD IN ITTA NOS.662 OF 2014 DATED.26-11-2014. 12. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT NO ADDITION CAN BE MADE TO THE INCOME OF THE ASSESSEE U/S 143(3) R.W.S 153C OF THE ACT WITHOUT THERE BEING ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF THE SEARCH. CASE LAW: DCIT VS. MIDWEST GOLD PRIVATE LIMITED 13. WITHOUT PREJUDICE TO THE ABOVE GROUND, THE LD. CIT (A) OUGHT TO HAVE APPRECIATED THE FACT THAT MATERIAL FOUND DURING THE COURSE OF SEARCH AT THE PREMISE OF SEARCH PARTY DID NOT BELONG TO THE ASSESSEE. 14. THE LD. CIT (A) OUGHT TO HAVE APPRECIATED THE FACT THAT NO ADDITION CAN BE MADE U/S 143(3) R.W.S 153C OF THE ACT WHEN ASSESSMENT U/S 143(3)/143(1) HAS ALREADY BEEN COMPLETED AND NO INCRIMINATING MATERIAL HAS BEEN FOUND DURING THE COURSE OF SEARCH. 15. THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED THAT THE PROVISIONS OF SEC. 153C CAN BE INVOKED ONLY WHEN IT IS ESTABLISHED BY THE AD HAVING JURISDICTION OVER THE SEARCHED PARTY, THAT, DOCUMENTS SEIZED DO NOT BELONG TO THE SEARCHED PERSON. CASE LAW: AS HELD BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF PEPSICO INDIA HOLDINGS (P.) LTD VS. ACIT [(2015) 228 T AXMANN 116J) ITA NO 1557 OF 2014 ABDUL RAHIM HYDERABAD PAGE 4 OF 6 3. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE WAS A SEARCH IN THE C ASE OF M/S. MBS JEWELLERS PRIVATE LIMITED ON 11.03.2010 AND AS CERTAIN DOCUMENTS AND LOOSE SHEETS WERE FOUND AND SEIZED, T HE AO HAS PROCEEDED TO INVOKE THE PROVISIONS OF SECTION 153C OF THE ACT IN THE CASE OF THE ASSESSEE. HE HAS PRODUCED A COPY OF THE ORDER SHEET IN SUPPORT OF HIS CONTENTION THAT THE ALLEGED SATISFACTION REPORT CANNOT BE TREATED AS FULFILLMENT OF CONDITIO NS FOR INVOKING THE PROVISIONS OF SECTION 153C OF THE ACT. FURTHER, HE HAS ALSO FILED BEFORE US THE COPY OF THE ORDER OF THIS TRIBU NAL DATED 9.12.2015 IN ITA NOS. 1082/HYD/2014 AND OTHERS, WHE REIN ON SIMILAR SET OF FACTS, THE ASSESSMENTS HAVE BEEN QUA SHED. 4. THE LEARNED DR HOWEVER, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ASSESSMENTS IN THE CASE OF THE ASSESSEE AND ALSO IN THE CASE OF THE OTHER ASSESSEE S IN ITA NO.1082/HYD/2014 & OTHERS, ARE PURSUANT TO THE SAME SEARCH IN THE CASE OF M/S. MBS JEWELLERS P LTD ON 11.03.2010. WE FIND THAT AT PARAS 2.1 TO PARA 4 OF THE ORDER, THE TRIBUNAL H AS CONSIDERED THE ISSUE IN DETAIL AND HAS OBSERVED AS UNDER: 2.1. THE LD. COUNSEL FOR THE ASSESSEE, HAS ALSO FIL ED THE CHARTS IN ALL THE ABOVE CASES AGAINST THE ASSESSMENT ORDERS U NDER SECTION 143(3) READ WITH SECTION 153C OF THE ACT REPRODUCIN G THE ORDER SHEET ENTRIES IN THE CASE OF ALL THESE ASSESSEES FO R INVOKING THE PROVISIONS OF SECTION 153C OF THE I.T. ACT. AS SEEN IN THE CASE OF SMT. REENA PETERSON, THE ORDER SHEET ENTRY IS AS FO LLOWS : 'MRS. REENA PETERSON, PAN APOPP0610C A.Y 2006-07 W/O. PETERSON #14/240, MIRJALGUDA MALKAJGIRI HYDER ABAD. ITA NO 1557 OF 2014 ABDUL RAHIM HYDERABAD PAGE 5 OF 6 SEARCH & SEIZURE OPERATIONS WERE CONDUCTED IN THE M BS JEWELLERS PVT. LTD., GROUP OF CASES ON 11.03.2010. DURING THE COURSE OF SEARCH, BOOKS OF ACCOUNTS, DOCUMENTS & OT HER LOOSE SHEETS WERE FOUND AND SEIZED. AS PER THE SEIZED DOC UMENTS, PAGES 03 TO 09 OF ANNEXURE A/PCG/RES/01 RELATES TO MRS. REENA PETERSON W/O. R. PETERSON PROCEEDINGS U/S.153C IS I NITIATED. PUT UP NOTICES U/S.153C & 142(1) OF THE IT ACT.' 3. SIMILAR ORDER SHEET ENTRIES ARE ALSO MADE IN THE CASE OF OTHER ASSESSEES AS WELL. FROM THESE NOTINGS, IT IS SEEN T HAT THE PROCEEDINGS UNDER SECTION 153C ARE INITIATED ONLY B ECAUSE THERE WERE CERTAIN MATERIAL DOCUMENTS SEIZED DURING THE C OURSE OF SEARCH IN THE CASE OF MBS JEWELLERS P. LTD., AND CE RTAIN PAGES THEREIN RELATE TO THE ASSESSEES HEREIN. THERE IS NO SATISFACTION RECORDED BY THE A.O. IN THE CASE OF MBS JEWELLERS P . LTD., THAT THE INCOME MENTIONED IN THE DOCUMENTS BELONGS TO THE AS SESSEES HEREIN. THE HON'BLE A.P. HIGH COURT IN THE CASE OF CIT-III, HYDERABAD VS. SHETTYS PHARMACEUTICALS & BIOLOGICALS LTD., (SUPRA) HAS HELD AS UNDER : 'HELD : IT IS CLEAR FROM SECTION 153C THAT FIRSTLY SATISFACTION HAS TO BE RECORDED BY THE ASSESSING OFFICER WHO CONDUCT ED SEARCH, THAT ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABL E ARTICLE OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS SEIZED OR RE QUISITIONED BELONGS OR BELONG TO A PERSON OTHER THAN THE PERSON REFERRED TO IN SECTION 153A. THEREAFTER, THE ASSESSING OFFICER HAVING JURISDICTION OVER THIRD PARTY ON RECEIPT OF THE SEI ZED MATERIAL OR BOOKS OF ACCOUNT OR DOCUMENT BEING HANDED OVER TO H IM SHALL RECORD HIS OWN SATISFACTION AFTER EXAMINING THE SAM E INDEPENDENTLY WITHOUT BEING INFLUENCED BY THE SATI SFACTION OF THE SEIZING OFFICER. IN OTHER WORDS IT IS NOT AN AUTOMA TIC ACTION. SATISFACTION OF TWO OFFICERS IS MISSING. IN THIS CO NNECTION THE TEXT OF THE ORDER OF THE ASSESSING OFFICER IS THAT A SEA RCH AND SEIZURE OPERATION UNDER SECTION 132 WAS CARRIED OUT IN THE GROUP CASE OF TYG AND OTHERS ON 25-3-2010. DURING THE COURSE OF S EARCH OPERATION DOCUMENTS BELONGING TO THE ASSESSEE HAVE BEEN SEIZED. HENCE, IT IS CONSIDERED TO INITIATE PROCEEDING UNDE R SECTION 153C. [PARA 6J THE AFORESAID SECTION MANDATES RECORDING O F SATISFACTION OF THE ASSESSING OFFICER(S) IS A PRE- CONDITION FOR INVOKING JURISDICTION AND IT IS NOT A MERE FORMALITY BECAUSE RECORDING OF SATISFACTION POSTULATES APPLICATION OF MIND CONSCIO USLY AS THE DOCUMENTS SEIZED MUST BE BELONGING TO THE ANY OTHER PERSON OTHER THAN THE PERSON REFERRED TO IN SECTION 153A. IT WAS CONTENDED THAT THE SAME ASSESSING OFFICER WA S INVOLVED IN THE MATTER. THIS FACT DOES NOT DISPENSE WITH ABO VE REQUIREMENT. IT IS SETTLED POSITION OF LAW THAT WHE N A THING IS TO BE DONE IN ONE PARTICULAR MANNER UNDER LAW THIS HAS TO BE DONE IN THAT MANNER ALONE AND NOT OTHER WAY. THE TRIBUNAL H AS CORRECTLY ITA NO 1557 OF 2014 ABDUL RAHIM HYDERABAD PAGE 6 OF 6 FOLLOWED THE PRINCIPLE. THERE WAS NO ELEMENT OF LAW TO BE DECIDED. [PARA 7). THE APPEAL WAS DISMISSED ACCORDINGLY. [PARA 9]' 4. RESPECTFULLY FOLLOWING THE JUDGMENT OF THE JURIS DICTIONAL HIGH COURT ON SIMILAR SET OF FACTS, WE HAVE NO HESITATIO N IN HOLDING THAT THE A.O. OF THE PERSON SEARCHED HAS NOT RECORD ED ANY SATISFACTION THAT THE INCOME RELATABLE TO THE SEIZE D MATERIAL BELONGS TO THE ASSESSEES HEREIN. THEREFORE, THE ASS ESSMENTS ARE QUASHED. 6. SINCE THE FACTS AND CIRCUMSTANCES IN THE CASE BE FORE US ARE EXACTLY THE SAME, WE ALLOW THE ADDITIONAL GR OUNDS OF APPEAL FILED BY THE ASSESSEE BEFORE US. SINCE WE HAVE QUAS HED THE ASSESSMENT PROCEEDINGS, WE SEE NO REASON TO ADJUDIC ATE THE OTHER GROUNDS OF APPEALS RAISED BY THE ASSESSEE ON MERITS OF THE ADDITIONS MADE IN THE ASSESSMENT ORDER. 7. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH MARCH, 2017. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 15 TH MARCH, 2017. VINODAN/SPS COPY TO: 1 P. MURALI & CO. CAS, 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD 500082 2 DCIT, CENTRAL CIRCLE 3 HYDERABAD 3 CIT (A)-VII HYDERABAD 4 CIT CENTRAL HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER