S. Madhavi, Hyderabad V. ACIT, Circle-8(1), Hyderabad

ITA 1936/HYD/2011

• Counselvise Citation: 193622514 RSA 2011
• Duration Of Justice: 2 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 18-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained investment; Search and seizure; Loose papers; Document seized; Corroborative evidences; Documents seized
• Section: 153A; 69; 132; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1936/HYD/2011 ASSESSMENT YEAR 2006-07 MS. S. MADHAVI HYDERABAD PAN: ANYPS4381H VS. THE ASST. CIT CIRCLE-8(1) HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SRI S. RAMA RAO RESPONDENT BY: SRI SOLGY JOSE T. KOTTARAM DATE OF HEARING: 21 .0 8 .2014 DATE OF PRONOUNCEMENT: 12 .0 9 .2014 ORDER PER SAKTIJIT DEY, J.M.: THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER DATED 28.9.2011 OF CIT(A)-III, HYDERABAD FOR A.Y. 2 006-07. 2. ASSESSEE HAS RAISED IN TOTAL SIX GROUNDS. GROUND NOS. 1 AND 6 ARE GENERAL IN NATURE AND DO NOT REQUI RE ADJUDICATION. ACCORDINGLY GROUND NOS. 1 AND 6 ARE DISMISSED. 3. IN GROUND NO. 2, ASSESSEE HAS RAISED A LEGAL ISSUE BY CHALLENGING THE VALIDITY OF PROCEEDINGS INITIATE D US. 153C OF INCOME-TAX ACT, 1961. IN GROUND NOS. 3 AND 4, ASSESSEE HAS CHALLENGED THE ADDITION MADE BY THE ASSESSING OFFICER OF AN AMOUNT OF RS. 31,02,000 AS SHORT TERM CAPITAL GAINS AND CONFIRMED BY THE CIT(A). IN GROUND NO. 5 ASSESSEE HAS CHALLENGED CONFIRMATION B Y THE CIT(A) OF AN AMOUNT OF RS. 3 LAKHS OUT OF THE ADDIT ION OF RS. 6,78,000 MADE BY THE ASSESSING OFFICER. 2 ITA NO. 1936/HYD/2011 MS. S. MADHAVI ========================== 4. BRIEFLY THE FACTS ARE, ASSESSEE AN INDIVIDUAL IS A PARTNER IN SEVERAL PARTNERSHIP FIRMS. A SEARCH AND SEIZURE OPERATION WAS CONDUCTED IN CASE OF SRI D. NAGARJUNA RAO AND SRI K. SRINIVASA REDDY AND OTHERS ON 29.10.2007. AS ALLEGED BY THE ASSESSING OFFICER, I N COURSE OF THE AFORESAID SEARCH AND SEIZURE OPERATIO N, CERTAIN INCRIMINATING MATERIAL RELATING TO ASSESSEE WAS FOUND AND SEIZED. AS A CONSEQUENCE, NOTICE U/S. 15 3C WAS ISSUED TO ASSESSEE ON 16.10.2008 CALLING UPON H ER TO FILE HER RETURN OF INCOME FOR A.Y. 2006-07. IN RES PONSE TO THE SAID NOTICE, ASSESSEE FILED A RETURN OF INCOME ON 24.9.2009 DECLARING TOTAL INCOME OF RS. 1,97,700. 5. DURING THE SCRUTINY ASSESSMENT PROCEEDINGS, ASSESSING OFFICER ON EXAMINING THE SEIZED MATERIAL FOUND THAT ASSESSEE HAD ENTERED INTO AN AGREEMENT OF SALE CUM GPA IN RESPECT OF PROPERTY AT PLOT NO. 22, SY. NO. 230 ADMEASURING 420 SQUARE YARDS (SQY) AT MADINAGUDA FO R A CONSIDERATION OF RS. 6,30,000 ON 27.6.2005. HE NOT ICED, SUBSEQUENTLY, ASSESSEE HAS SOLD AWAY THE SAID PROPE RTY ON 3.2.2006 THROUGH A REGISTERED SALE DEED TO M/S. SITARAMANJANEYA CONSTRUCTIONS FOR A CONSIDERATION O F RS. 8,40,000. THE ASSESSING OFFICER FOUND THAT PAGE 55 DATED 29.10.2007 OF THE SEIZED MATERIAL MARKED ANNEXURE A/DNR/18 DATED 29.10.2007 IS AN ACCOUNT IN THE NAME OF SRI S. VENKATESWARA RAO ALIAS VENKATESH WHICH REFLECTED CERTAIN PAYMENTS TOWARDS PURCHASE OF PLOT S. WHEN SRI D. NAGARJUNA RAO WHO IS THE PARTNER OF M/S . SITARAMANJANEYA CONSTRUCTIONS WAS CONFRONTED WITH T HE AFORESAID SEIZED MATERIAL, HE STATED THAT THE ENTRI ES IN SEIZED DOCUMENT WERE MADE IN HIS OWN HANDWRITING AN D THEY REFLECTED THE PAYMENTS MADE BY HIM TO SRI 3 ITA NO. 1936/HYD/2011 MS. S. MADHAVI ========================== VENKATESH TOWARDS PURCHASE OF CERTAIN PROPERTIES. FURTHER, SRI D. NAGARJUNA RAO STATED THAT THEY HAD PURCHASED THE PROPERTY BEING PLOT NO. 22 AT SY. NO. 230 PERTAINING TO THE PRESENT ASSESSEE, SMT. S. MADHAVI THROUGH SRI VENKATESH AND HAVE PAID AN AMOUNT OF RS . 37.80,000 TOWARDS SALE CONSIDERATION. IN THIS CONN ECTION, THE ASSESSING OFFICER ALSO EXAMINED ASSESSEE AND HE R HUSBAND SRI S.K. VISWESWARA RAO, WHO OUT RIGHTLY DE NIED OF HAVING RECEIVED THE SALE CONSIDERATION OF RS. 37 ,80,000. FURTHER, THE ASSESSING OFFICER NOTED THAT M/S. SITARAMANJANEYA CONSTRUCTIONS SUBSEQUENTLY SOLD THE VERY SAME PROPERTY TO SRI P. GANGADHARA RAO FOR A RECORDED CONSIDERATION OF RS. 14,70,000 THOUGH THE ACTUAL SALE CONSIDERATION WHICH PASSED BETWEEN THE PARTIES WAS RS. 81,48,000 AND IN THE RETURN OF INCOME FILED THE SAID FIRM ADMITTED A PROFIT OF RS. 43,58,000 AFTER REDUC ING THE AMOUNT OF RS. 37,80,000 CLAIMED TO HAVE BEEN PAID T O SMT. MADHAVI, THE PRESENT ASSESSEE. THE ASSESSING OFFICER ALSO REFERRED TO THE STATEMENT RECORDED FRO M SRI S. VENKATESWARA RAO ALIAS VENKATESH, WHO ACTED AS A MEDIATOR FOR SELLING THE PROPERTY WHEREIN HE STATED THAT ASSESSEE HAS SOLD THE PROPERTY IN QUESTION FOR A CONSIDERATION OF RS. 37.80 LAKHS. ON THE AFORESAID BASIS, THE ASSESSING OFFICER CONCLUDED THAT THOUGH THE REGISTERED SALE CONSIDERATION IS RS. 8,40,000 BUT A SSESSEE HAD RECEIVED SALE CONSIDERATION OF RS. 37.80 LAKHS FROM M/S. SITARAMANJANEYA CONSTRUCTIONS. ACCORDINGLY, T HE ASSESSING OFFICER COMPUTED THE SHORT TERM CAPITAL G AINS AT RS. 31,02,000 ON THE BASIS OF SALE CONSIDERATION OF RS. 37.80 LAKHS ALLEGED TO HAVE BEEN RECEIVED BY ASSESS EE AS PER THE SEIZED MATERIAL. FURTHER, THE ASSESSING OF FICER ALSO ADDED AN AMOUNT OF RS. 6,78,000 BEING THE AMOU NT 4 ITA NO. 1936/HYD/2011 MS. S. MADHAVI ========================== PAID BY ASSESSEE TOWARDS PURCHASE OF THE PROPERTY O N 27.6.2005 AS UNEXPLAINED INVESTMENT U/S. 69 OF THE ACT. AGAINST THE ASSESSMENT ORDER SO PASSED, ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 6. BEFORE THE CIT(A) ASSESSEE CHALLENGED THE ASSESSMENT ORDER BOTH ON THE VALIDITY OF PROCEEDING S INITIATED U/S. 153C OF THE ACT AS WELL AS ON THE ME RITS OF THE ADDITIONS MADE BY THE ASSESSING OFFICER. THE C IT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE IN TH E LIGHT OF THE MATERIALS AVAILABLE ON RECORD HELD THAT AS T HE SEIZED DOCUMENT RECOVERED FROM THE PREMISES OF SRI D. NAGARJUNA RAO REFERRED TO TRANSACTIONS MADE BY ASSE SSEE, THE ASSESSING OFFICER WAS JUSTIFIED IN INITIATING PROCEEDINGS U/S. 153C. SO FAR AS THE MERITS OF THE ADDITION MADE ON ACCOUNT OF SHORT TERM CAPITAL GAIN S, THE CIT(A) HELD THAT AS THE SEIZED DOCUMENT AS WELL AS THE STATEMENT RECORDED FROM SRI D. NAGARJUNA RAO AND TH E MEDIATOR SRI S. VENKATESWARA RAO CLEARLY INDICATED PAYMENT OF SALE CONSIDERATION OF RS. 37,80,000 TOWA RDS SALE OF THE PROPERTY BY ASSESSEE, THE COMPUTATION O F SHORT TERM CAPITAL GAINS BY THE ASSESSING OFFICER IS CORR ECT. HOWEVER, CONSIDERING THE FACT THAT ASSESSEE HAD ALR EADY DISCLOSED AN AMOUNT OF RS. 1,61,700 FROM SUCH SALE TRANSACTION, THE CIT(A) DIRECTED THE ASSESSING OFFI CER TO RESTRICT THE ADDITION MADE TOWARDS SHORT TERM CAPIT AL GAINS TO RS. 29,40,300. SO FAR AS THE ADDITION OF RS. 6,78,000 AS UNEXPLAINED INVESTMENT U/S. 69 OF THE A CT, THE CIT(A) AFTER CONSIDERING SUBMISSIONS OF ASSESSE E ACCEPTED ASSESSEE'S EXPLANATION FOR AN AMOUNT OF RS . 3,78,000 AND CONFIRMED THE ADDITION OF RS. 3 LAKHS. 5 ITA NO. 1936/HYD/2011 MS. S. MADHAVI ========================== 7. THE LEARNED AR SUBMITTED BEFORE US THAT ASSESSMENT MADE U/S. 153C OF THE ACT IS INVALID AS THE CONDITION PRECEDENT FOR INITIATING THE PROCEEDINGS U/S. 153C IS NOT SATISFIED. THE LEARNED AR REFERRING TO THE SEIZED DOCUMENT I.E., PAGE NO. 55 OF ANNEXURE A/DNR /18 SUBMITTED, THE SEIZED DOCUMENT NEITHER HAS ANY REFE RENCE TO ASSESSEE NOR TO THE PROPERTY OF THE ASSESSEE. F URTHER, IT WAS SEIZED FROM A THIRD PARTY. THEREFORE, THE S AID SEIZED DOCUMENT CANNOT BE CONSIDERED TO BE BELONGIN G TO ASSESSEE AS ENVISAGED U/S. 153C OF THE ACT. THE LE ARNED AR SUBMITTED THAT SUCH SEIZED DOCUMENT IS NOT IN TH E NATURE OF BOOKS OF ACCOUNT, MONEY, BULLION OR JEWEL LERY BELONGING TO ASSESSEE. AS PER THE LANGUAGE OF SECT ION 153C, THE ASSESSING OFFICER SHOULD NOT HAVE RECORDE D SATISFACTION FOR INITIATING THE PROCEEDINGS U/S. 15 3C OF THE ACT. THEREFORE, THE AO HAVING NO JURISDICTION TO I NITIATE PROCEEDINGS U/S. 153C, THE NOTICE ISSUED AND ASSESS MENT COMPLETED IN PURSUANCE THEREOF UNDER THE PROVISIONS OF SECTION 153C IS INVALID. 8. EVEN SO FAR AS THE MERIT OF THE ADDITION IS CONCERNED, THE LEARNED AR SUBMITTED THAT THE ADDITI ON IS NOT SUSTAINABLE. REFERRING TO THE SEIZED DOCUMENT, THE LEARNED AR SUBMITTED THAT THE AMOUNTS MENTIONED THEREIN INCLUDE CERTAIN CHEQUE PAYMENTS. HOWEVER, THOSE CHEQUES WERE NEVER ISSUED IN FAVOUR OF ASSESSEE NOR SHE ENCASHED THEM. ON THE OTHER HAND, THE CHEQUES WERE ENCASHED BY SRI S. VENKATESWARA RAO. THE LEARNED A R SUBMITTED, ASSESSEE HAD NOT RECEIVED A SINGLE RUPEE DIRECTLY FROM THE PURCHASER M/S. SITARAMANJANEYA CONSTRUCTIONS TOWARDS SALE CONSIDERATION. THE SALE CONSIDERATION WAS RECEIVED BY ASSESSEE FROM THE MED IATOR 6 ITA NO. 1936/HYD/2011 MS. S. MADHAVI ========================== SRI S. VENKATESWARA RAO AND ALMOST THE ENTIRE AMOUN T WAS RECEIVED THROUGH CHEQUES. IT WAS, THEREFORE, SUBMITTED THAT AS THERE IS NO EVIDENCE BEFORE THE ASSESSING OFFICER TO INDICATE THAT ASSESSEE HAS ACT UALLY RECEIVED THE AMOUNT OF RS. 37.80 LAKHS TOWARDS SALE CONSIDERATION OF THE PROPERTY, NO SUCH ADDITION CAN BE MADE ON PRESUMPTIONS AND SURMISES. THE LEARNED AR REFERRING TO THE STATEMENT RECORDED FROM SRI D. NAG ARJUNA RAO, PARTNER OF M/S. SITARAMANJANEYA CONSTRUCTIONS SUBMITTED, THE SAID PERSON HAS ALSO CATEGORICALLY S TATED THAT HE PAID THE AMOUNT TO SRI S. VENKATESWARA RAO AND NOT TO ASSESSEE. IN THESE CIRCUMSTANCES, WHEN ASSE SSEE HAS NOT RECEIVED ANY AMOUNT FROM THE PURCHASER DIRE CTLY, IT CANNOT BE SAID THAT THE AMOUNT MENTIONED IN THE SEIZED DOCUMENT WAS RECEIVED BY HER TOWARDS SALE CONSIDERA TION. THE LEARNED AR SUBMITTED, THE ASSESSING OFFICER HAS PLACED MUCH RELIANCE ON THE STATEMENT OF SRI S. VENKATESWARA RAO, THE MEDIATOR. HOWEVER, SRI S. VENKATESWARA RAO, BEING AN INTERESTED PARTY WHO WAS ACTING AS A MEDIATOR BETWEEN ASSESSEE AND THE PURCH ASER AND WHO ALSO RECEIVED THE SALE CONSIDERATION FROM T HE PURCHASER, HIS STATEMENT CANNOT BE RELIED UPON. FU RTHER, ASSESSEE DURING THE ASSESSMENT PROCEEDINGS HAVING SPECIFICALLY REQUESTED FOR CROSS EXAMINATION OF SRI S. VENKATESWARA RAO AND THE SAME HAVING NOT BEEN GRANTED TO ASSESSEE, THE STATEMENT OF SRI S. VENKAT ESWARA RAO WILL HAVE NO EVIDENTIARY VALUE AS IT WAS NOT TE STED THROUGH CROSS-EXAMINATION. 9. THE LEARNED AR SUBMITTED THAT THE SALE DEED AS WELL AS THE PAYMENT RECEIVED INDICATE THAT ASSESSEE HAD RECEIVED SALE CONSIDERATION DIRECTLY FROM SRI S. 7 ITA NO. 1936/HYD/2011 MS. S. MADHAVI ========================== VENKATESWARA RAO MUCH PRIOR TO THE AMOUNT WAS PAID BY THE PURCHASER TO SRI S. VENKATESWARA RAO. THEREFORE , IF AT ALL ANY ON-MONEY HAS BEEN PAID ASSESSEE WAS NOT IN AWARE OF THE SAME AND IT MIGHT HAVE BEEN PAID TO SR I S. VENKATESWARA RAO, THE MEDIATOR. IT WAS SUBMITTED TH AT THERE BEING NO CLEAR CUT EVIDENCE TO CONCLUSIVELY P ROVE THAT ASSESSEE HAD RECEIVED THE AMOUNT OF RS. 37,80, 000 FROM THE PURCHASER, THE ADDITION MADE ON ACCOUNT OF SHORT TERM CAPITAL GAINS IS NOT JUSTIFIED. SO FAR AS THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IS CONCERNED, THE LEARNED AR AGAIN REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A). 10. THE LEARNED DR, ON THE OTHER HAND, STRONGLY SUPPORTING THE ORDER OF THE CIT(A) SUBMITTED THAT S INCE THE SEIZED DOCUMENT HAS A DIRECT NEXUS WITH THE SAL E TRANSACTION ENTERED BETWEEN ASSESSEE AND M/S. SITARAMANJANEYA CONSTRUCTIONS THERE CANNOT BE ANY DOUBT WITH REGARD TO THE VALIDITY OF PROCEEDINGS IN ITIATED U/S. 153C OF THE ACT. THE LEARNED DR SUBMITTED, TH E PURCHASER OF THE PROPERTY AS WELL AS THE MEDIATOR H AVING ADMITTED THE SALE CONSIDERATION BEING PAID TO ASSES SEE, ASSESSEE'S CLAIM THAT SHE HAS NOT RECEIVED MORE THA N WHAT IS RECORDED IN THE REGISTERED SALE DEED IS UNACCEPTABLE. THE LEARNED DR SUBMITTED, THE ASSESS EE HAS NEVER CHALLENGED THE VALIDITY OF PROCEEDINGS U/ S. 153C OF THE ACT BEFORE THE ASSESSING OFFICER. THER EFORE, ASSESSEE HAVING VOLUNTARILY AND KNOWINGLY PARTICIPA TED IN THE ASSESSMENT PROCEEDINGS, SHE CANNOT CHALLENGE TH E SAME SUBSEQUENTLY THROUGH THE APPEAL PROCEEDINGS. SO FAR AS THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT, THE LEARNED DR SUBMITTED THAT ASSESSEE 8 ITA NO. 1936/HYD/2011 MS. S. MADHAVI ========================== HAVING FAILED TO EXPLAIN THE SOURCE OF INVESTMENT W ITH SUPPORTING EVIDENCE, THE ADDITION SUSTAINED BY THE CIT(A) IS CORRECT. 11. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIALS ON RECORD AS WELL AS THE ORDERS OF THE REVENUE AUTHORITIES. BEFORE VENTURING IN TO DECIDE THE LEGAL ISSUE IT IS NECESSARY TO LOOK INTO THE PR OVISIONS CONTAINED U/S. 153C OF THE ACT WHICH READ AS UNDER: ASSESSMENT OF INCOME OF ANY OTHER PERSON. 153C. [(1)]NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 139, SECTION 147, SECTION 148, SECTION 149, SECTION 151 AND SECTION 153, WHERE THE ASSESSING OFFICER IS SATISFIED THAT ANY MONEY, BULLION, JEWEL LERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS SEIZED OR REQUISITIONED BELONGS OR BELONG TO A PERSON OTHER THAN THE PERSON REFERRED TO IN SECTI ON 153A, THEN THE BOOKS OF ACCOUNT OR DOCUMENTS OR ASS ETS SEIZED OR REQUISITIONED SHALL BE HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTH ER PERSON AND THAT ASSESSING OFFICER SHALL PROCEED AGA INST EACH SUCH OTHER PERSON AND ISSUE SUCH OTHER PERSON NOTICE AND ASSESS OR REASSESS INCOME OF SUCH OTHER PERSON IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A:] 12. ON A PLAIN READING OF THE AFORESAID PROVISIONS IT BECOMES CLEAR THAT THE ASSESSING OFFICER IF HE IS S ATISFIED WITH ANY BOOKS OF ACCOUNT, MONEY, BULLION, JEWELLER Y, DOCUMENT FOUND IN THE COURSE OF A SEARCH CONDUCTED BELONGS TO ANY OTHER PERSON THEN HE CAN INITIATE PROCEEDINGS U/S. 153C OF THE ACT AGAINST SUCH OTHER PERSON UNDER HIS JURISDICTION OR THE ASSESSING OFFI CER HAS TO TRANSFER THE CASE TO THE ASSESSING OFFICER WHO H AS JURISDICTION OVER SUCH OTHER PERSON. THEREFORE, TH E CONDITION PRECEDENT FOR INITIATING PROCEEDINGS U/S. 153C OF THE ACT IS, THE SEIZED DOCUMENT MUST BELONG TO T HE PERSON AGAINST WHOM THE PROCEEDINGS U/S. 153C IS 9 ITA NO. 1936/HYD/2011 MS. S. MADHAVI ========================== SOUGHT TO BE INITIATED. IT IS CLEAR FROM THE ASSES SMENT ORDER THAT THE SEIZED MATERIAL ON THE BASIS OF WHIC H THE ASSESSING OFFICER HAS INITIATED THE PROCEEDINGS U/S . 153C OF THE ACT IS PAGE 55 OF ANNEXURE A/DNR/18. A REFE RENCE TO THE SEIZED MATERIAL, A COPY OF WHICH IS AT PAGE 75 OF THE PAPER BOOK, INDICATES THAT THE SAME IS AN ACCOUNT RELATING TO SRI S. VENKATESWARA RAO IN WHICH CERTAI N PAYMENTS HAVE BEEN RECORDED. ADMITTEDLY, THE SAID SEIZED MATERIAL WAS NOT SEIZED FROM ASSESSEE BUT FR OM SRI D. NAGARJUNA RAO IN WHOSE CASE SEARCH AND SEIZURE OPERATION WAS CONDUCTED U/S. 132. FURTHER, SEIZED MATERIAL HAS NEITHER ANY REFERENCE TO THE ASSESSEE, EVEN REMOTELY, NOR TO THE PROPERTY SOLD BY HER. THAT BE ING THE CASE, THE SEIZED MATERIAL CANNOT BE SAID TO BE BELO NGING TO ASSESSEE. HENCE THE PRE-CONDITION FOR INITIATING PROCEEDINGS U/S. 153C IS NOT SATISFIED. IN THIS CO NTEXT WE REFER TO THE DECISION OF THE CO-ORDINATE BENCH IN T HE CASE OF M/S. SHOURI CONSTRUCTIONS AND T. JAIPAL REDDY IN ITA NOS. 2056 AND 2057/HYD/2011 DATED 28.6.2013 WHEREIN THE CO-ORDINATE BENCH WHILE FOLLOWING THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF VIJAYBHAI N. CHANDRANI VS. ACIT (333 ITR 436) AND SOME OTHER ORD ERS OF THE TRIBUNAL HELD AS FOLLOWS: '10. THUS THE CONDITION PRECEDENT FOR ASSUMPTION OF JURISDICTION U/S 153C IS, THE AO MUST BE SATISFIED THAT THE SEIZED MATERIALS BELONGS TO SUCH OTHER PERSON. THE WORD BELONG HAS NOT BEEN DEFINED UNDER THE ACT. AS PER THE DICTIONARY MEANING BELONG TO MEANS BE THE PROPERTY OF; BE THE RIGHTFUL POSSESSION OF; BE DUE TO. UNDISPUTEDLY SEIZED DOCUMENT ON THE BASIS OF WHICH PROCEEDING U/S 153C IS INITIATED AGAINST THE ASSESSEE IS A LOOSE SHEET MARKED AS A/DNR/18. 10 ITA NO. 1936/HYD/2011 MS. S. MADHAVI ========================== 11. SINCE THE SEIZED DOCUMENT REPRODUCED HEREINABOVE IS NOT PROPERLY VISIBLE, WE ARE ALSO ANNEXING HEREWITH A COPY OF THE SAID DOCUMENT TO THIS ORDER, WHICH SHOULD BE TREATED AS PART OF THIS ORDER. 12. THIS DOCUMENT WAS SEIZED FROM THE BUSINESS PREMISES OF D. NAGARJUNA RAO IN COURSE OF ACTION U/S 132 OF THE ACT AGAINST HIM. IN THE IMPUGNED ASSESSMENT ORDER THE AO HAS ALSO OBSERVED THAT THE SAID D. NAGARJUNA RAO HAD ADMITTED THAT ENTRIES IN THE SEIZED DOCUMENTS WERE MADE BY HIM IN HIS OWN HANDWRITING. WHILE CONSIDERING THE OBJECTION OF THE ASSESSEE, THE AO HAS ALSO ADMITTED THE FACT THAT NEITHER THE NAME OF THE ASSESSEES APPEAR IN THE SEIZED DOCUMENT NOR IT BEARS THEIR SIGNATURE. THE NOTINGS MADE IN THE SEIZED DOCUMENT ONLY SHOWS THAT AN AMOUNT OF RS. 74,81,250/- WAS PAID TO MR. VENKATESH TOWARDS SALE CONSIDERATION OF THE PROPERTY. WHEN THE DOCUMENT IN QUESTION WAS NOT SEIZED FROM THE ASSESSEE BUT FROM A THIRD PARTY, WHO ADMITTEDLY HAS MADE THE ENTRIES THEREIN AND FURTHERMORE WHEN THE SEIZED DOCUMENT NEITHER MENTIONS THE NAME OF THE ASSESSEE OR BEARS HIS SIGNATURE, THEN BY NO STRETCH OF IMAGINATION IT CAN BE SAID TO BE BELONGING TO THE ASSESSEE. THUS, THE PRECONDITION FOR INITIATING PROCEEDING U/S 153C IS NOT SATISFIED. THEREFORE, THE INITIATION OF PROCEEDING U/S 153C AGAINST THE ASSESSEE IS WITHOUT JURISDICTION. THE HONBLE GUJARAT HIGH COURT IN CASE OF VIJAYBHAI N. CHANDRANI VS. ACIT [SUPRA] WHILE CONSIDERING IDENTICAL ISSUE HELD AS UNDER:- 12. ON A PLAIN READING OF THE AFORESAID PROVISIONS IT IS APPARENT THAT SECTIONS 153A, 153B AND 153C LAY DOWN A SCHEME FOR ASSESSMENT IN CASE OF SEARCH AND REQUISITION. 11 ITA NO. 1936/HYD/2011 MS. S. MADHAVI ========================== SECTION 153A DEALS WITH PROCEDURE FOR ISSUANCE OF NOTICE AND ASSESSMENT OR REASSESSMENT IN CASE OF THE PERSON WHERE A SEARCH IS INITIATED UNDER SECTION 132 OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ASSETS ARE REQUISITIONED UNDER SECTION 132A AFTER THE 31ST DAY OF MAY, 2003. SECTION 153B LAYS DOWN THE TIME LIMIT FOR COMPLETION OF ASSESSMENT UNDER SECTION 153A. SECTION 153C WHICH IS SIMILARLY WORDED TO SECTION 158BD OF THE ACT, PROVIDES THAT WHERE THE ASSESSING OFFICER IS SATISFIED THAT ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING. OR BOOKS OF ACCOUNT OR DOCUMENTS SEIZED OR REQUISITIONED BELONGS OR BELONG TO A PERSON OTHER THAN THE PERSON REFERRED TO IN SECTION 153A HE SHALL PROCEED AGAINST EACH SUCH OTHER PERSON AND ISSUE SUCH OTHER PERSON NOTICE AND ASSESS OR REASSESS INCOME OF SUCH OTHER PERSON. HOWEVER, THERE IS A DISTINCTION BETWEEN THE TWO PROVISIONS INASMUCH AS UNDER SECTION 153C NOTICE CAN BE ISSUED ONLY WHERE THE MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS SEIZED OR REQUISITIONED BELONG TO SUCH OTHER PERSON, WHEREAS UNDER SECTION 158BD IF THE ASSESSING OFFICER IS SATISFIED THAT ANY UNDISCLOSED INCOME BELONGS TO ANY PERSON, OTHER THAN THE PERSON WITH RESPECT TO WHOM SEARCH WAS MADE UNDER SECTION 132 OR WHOSE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR ASSETS WERE REQUISITIONED UNDER SECTION 132A, HE SHALL PROCEED AGAINST SUCH OTHER PERSON UNDER SECTION 158BC. 12 ITA NO. 1936/HYD/2011 MS. S. MADHAVI ========================== 13. THUS A CONDITION PRECEDENT FOR ISSUING NOTICE UNDER SECTION 153C AND ASSESSING OR REASSESSING INCOME OF SUCH OTHER PERSON, IS THAT THE MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS SEIZED OR REQUISITIONED SHOULD BELONG TO SUCH PERSON. IF THE SAID REQUIREMENT IS NOT SATISFIED, RECOURSE CANNOT BE HAD TO THE PROVISIONS OF SECTION 153C OF THE ACT. 14. EXAMINING THE FACTS OF THE PRESENT CASE IN THE LIGHT OF THE AFORESAID STATUTORY SCHEME, IT IS AN ADMITTED POSITION AS EMERGING FROM THE RECORD OF THE CASE, THAT THE DOCUMENTS IN QUESTION, NAMELY THE THREE LOOSE PAPERS RECOVERED DURING THE SEARCH PROCEEDINGS DO NOT BELONG TO THE PETITIONER. IT MAY BE THAT THERE IS A REFERENCE TO THE PETITIONER INASMUCH AS HIS NAME IS REFLECTED IN THE LIST UNDER THE HEADING SAMUTKARSH MEMBERS DETAILS AND CERTAIN DETAILS ARE GIVEN UNDER DIFFERENT COLUMNS AGAINST THE NAME OF THE PETITIONER ALONG WITH OTHER MEMBERS, HOWEVER, IT IS NOBODY'S CASE THAT THE SAID DOCUMENTS BELONG TO THE PETITIONER. IT IS NOT EVEN THE CASE OF THE REVENUE THAT THE SAID THREE DOCUMENTS ARE IN THE HANDWRITING OF THE PETITIONER. IN THE CIRCUMSTANCES, WHEN THE CONDITION PRECEDENT FOR ISSUANCE OF NOTICE IS NOT FULFILLED ANY ACTION TAKEN UNDER SECTION 153C OF THE ACT STANDS VITIATED. 13. THE ITAT, BANGALORE BENCH IN CASE OF P. SRINIVAS NAIK VS. ACIT [SUPRA] HAS HELD AS UNDER: 7. WE HAVE HEARD BOTH THE PARTIES. IT IS AN UNDISPUTED FACT THAT BOOKS 13 ITA NO. 1936/HYD/2011 MS. S. MADHAVI ========================== OF ACCOUNT OR DOCUMENT DOES NOT BELONG TO THE ASSESSEE, AS THESE WERE SEIZED FROM THE PREMISES OF SHRI REDDY. IT IS NOWHERE STATED THAT THESE BOOKS OF ACCOUNT OR DOCUMENTS SHOWED THAT ALL THE TRANSACTIONS BELONGING TO THE ASSESSEE. SUCH BOOKS OF ACCOUNT OR DOCUMENTS CONTAINED THE TRANSACTIONS RELATING TO THE GROUP CONCERNS OF SHRI REDDY. NO VALUABLE BELONGING TO THE ASSESSEE HAS BEEN SEIZED DURING THE COURSE OF SEARCH. THE TERM BELONGING, IMPLIED SOMETHING MORE THAN THE IDEA OF CASUAL ASSOCIATION. IT INVOLVES THE NOTION OF CONTINUITY AND INDICATES ONE MORE OR LESS INTIMATE CONNECTION WITH THE PERSON OVER A PERIOD OF TIME. THE BOOKS OF ACCOUNT OR DOCUMENTS SEIZED DURING THE COURSE OF SEARCH HAVE A CLOSE ASSOCIATION WITH THE GROUP CONCERN OF SHRI REDDY. IT RECORDS THE TRANSACTION CARRIED OUT BY THAT GROUP. IT DOES NOT RECORD THE TRANSACTION CARRIED OUT BY THE ASSESSEE. UNDER WEALTH-TAX ACT, ASSETS BELONGING TO ASSESSEE WERE TAXABLE. THE EXPRESSION BELONGING TO THE ASSESSEE CONNOTES BOTH THE COMPLETE OWNERSHIP AND LIMITED OWNERSHIP OF INTEREST. OF COURSE BELONGING TO IS CAPABLE CONNOTING, INTEREST, WHICH IS LESS THAN ABSOLUTE PERFECT LEGAL TITLE. HOWEVER, THERE SHOULD BE SOME LIMITED OWNERSHIP OF INTEREST, IF IT IS TO BE PERMITTED THAT THE ASSETS BELONGS TO THE ASSESSEE. IN THE INSTANT CASE, DOCUMENTS OR BOOKS OF ACCOUNT FOUND DURING THE COURSE OF SEARCH AND SEIZED CANNOT BE TERMED, TO BE INDICATING ANY LIMITED INTEREST OF THE OWNERSHIP OF THE ASSESSEE IN SUCH BOOKS OF ACCOUNT OR DOCUMENTS. THE 14 ITA NO. 1936/HYD/2011 MS. S. MADHAVI ========================== LANGUAGE USED IN SECTION 153C IS MATERIALLY DIFFERENT FROM THE LANGUAGE USED UNDER SECTION 158BD. AS PER SECTION 158BD, IF ANY UNDISCLOSED INCOME RELATES TO OTHER PERSON, THEN ACTION AGAINST SUCH OTHER PERSON CAN BE TAKEN PROVIDED SUCH UNDISCLOSED INCOME IS REFERABLE TO THE DOCUMENT SEIZED DURING THE COURSE OF SEARCH. HOWEVER, SECTION 153C SAYS THAT IF VALUABLE OR BOOKS OF ACCOUNT OR DOCUMENTS BELONGING TO OTHER PERSONS ARE SEIZED THEN ACTION UNDER SECTION 153C CAN BE TAKEN AGAINST THAT PERSON. IN THE INSTANT CASE, WE ARE SATISFIED THAT BOOKS OF ACCOUNT OR DOCUMENTS DO NOT BELONG TO THE ASSESSEE AND, THEREFORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN INITIATING ACTION UNDER SECTION 153A READ WITH SECTION 153C OF THE INCOME- TAX ACT. THE ASSESSING OFFICER IS FREE TO TAKE PROPER REMEDIAL MEASURE AS PER LAW. 14. WE, IN THE PRECEDING PARAGRAPHS, HAVE ALREADY HELD THAT THE SEIZED DOCUMENT ON THE BASIS OF WHICH PROCEEDING U/S 153C WAS INITIATED CANNOT BE SAID TO BE BELONGING TO THE ASSESSEE. THEREFORE, CONSIDERED IN THE LIGHT OF THE RATIOS LAID DOWN IN THE JUDICIAL PRECEDENTS REFERRED TO ABOVE, THE ASSUMPTION OF JURISDICTION U/S 153C HAS TO BE HELD AS INVALID AND CONSEQUENTIALLY THE ASSESSMENT ORDER PASSED MUST BE DECLARED AS WITHOUT JURISDICTION. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE CIT(A) AND ALLOW THE APPEAL OF THE ASSESSEE.' 15. AFORESAID VIEW WAS REITERATED AGAIN BY THE CO- ORDINATE BENCH IN CASE OF PULLA GANGADHAR RAO VS. A CIT IN ITA NO. 2097/HYD/2012 DATED 9.4.2014. THE RATIO LAID 15 ITA NO. 1936/HYD/2011 MS. S. MADHAVI ========================== DOWN AS AFORESAID BY THE CO-ORDINATE BENCH CLEARLY APPLY TO THE FACTS OF THE PRESENT CASE. THEREFORE, RESPE CTFULLY FOLLOWING THE SAME WE HOLD THAT AS THE SEIZED MATER IAL WAS NEITHER SEIZED FROM ASSESSEE NOR HAS ANY REFERE NCE TO HER OR HER PROPERTY, IT CANNOT BE SAID TO BE BELONG ING TO ASSESSEE. HENCE, THE PROCEEDINGS INITIATED U/S. 15 3C IS NOT VALID. CONSEQUENTLY THE ASSESSMENT ORDER PASSE D IN PURSUANCE THEREOF IS ALSO INVALID. IN VIEW OF OUR AFORESAID DECISION THE MERIT OF THE ADDITIONS ARE OF MERE ACA DEMIC INTEREST. HOWEVER, SINCE THE PARTIES WERE HEARD ON MERITS, WE CONSIDER IT APPROPRIATE TO RECORD OUR FINDINGS W ITH REGARD TO THE MERITS OF THE ADDITIONS ALSO. 16. AS CAN BE SEEN FROM THE SEIZED MATERIAL I.E., PAGE 55 OF ANNEXURE A/DNR/18 IT CONTAINS CERTAIN PAYMENT S MADE TO SRI S. VENKATESWARA RAO ON DIFFERENT DATES TOTALLING TO RS. 96,80,000. ON THE BASIS OF THE SA ID SIZED DOCUMENT AS WELL AS THE STATEMENT RECORDED FROM SRI D. NAGARJUNA RAO, PARTNER OF M/S. SITARAMANJANEYA CONSTRUCTIONS AND THE MEDIATOR SRI S. VENKATESWARA RAO, THE ASSESSING OFFICER INFERRED THAT ASSESSEE HAS RE CEIVED THE ALLEGED SALE CONSIDERATION OF RS. 37,80,000. H OWEVER, THERE IS NO EVIDENCE ON RECORD WHICH CAN CLINCHINGL Y ESTABLISH THE FACT THAT ASSESSEE HAS ACTUALLY RECEI VED THE SALE CONSIDERATION OF RS. 37,80,000 AS STATED BY TH E PURCHASER AND THE MEDIATOR. AS WE HAVE ALREADY STA TED HEREIN BEFORE, THE SEIZED DOCUMENT NEITHER HAS ANY REFERENCE TO ASSESSEE NOR TO THE PROPERTY SOLD BY A SSESSEE. FURTHER THE ENTRIES MADE IN THE SEIZED DOCUMENT SHO W CERTAIN CHEQUE PAYMENTS. HOWEVER, NO EFFORT OR ENQ UIRY HAS BEEN MADE BY THE ASSESSING OFFICER TO ASCERTAIN IN WHOSE FAVOUR THE CHEQUES WERE DRAWN AND WHO HAD 16 ITA NO. 1936/HYD/2011 MS. S. MADHAVI ========================== ENCASHED THEM. FURTHER, THE TOTAL AMOUNT AS PER TH E SEIZED DOCUMENT IS RS. 96.80 LAKHS WHEREAS THE PAYM ENT ADMITTEDLY MADE TO ASSESSEE IS RS. 37.80 LAKHS. THEREFORE, THE OTHER AMOUNT MENTIONED IN THE SEIZED DOCUMENT RELATES TO WHOM OR TO WHICH TRANSACTION, H AS NOT BEEN VERIFIED. IN THESE CIRCUMSTANCES, WITHOUT MAKING ANY ENQUIRY TO ESTABLISH THE NEXUS BETWEEN T HE PAYMENT REFERRED TO IN THE SEIZED DOCUMENT AND THE AMOUNT STATED TO HAVE BEEN RECEIVED BY ASSESSEE IT CANNOT BE SAID THAT ASSESSEE HAS RECEIVED SALE CONSIDERATI ON OF RS. 37.80 LAKHS. AS WE HAVE ALREADY MENTIONED, AT NO POINT OF TIME THE ASSESSEE HAS AN OCCASION TO DEAL DIRECTLY WITH THE PURCHASER M/S. SITARAMANJANEYA CONSTRUCTIO NS. IT WAS SRI S. VENKATESWARA RAO WHO WAS ACTING AS A MEDIATOR BETWEEN ASSESSEE AND THE PURCHASER. IN FA CT, ASSESSEE'S COMPLIANCE DATED 22.12.2009 BEFORE AO CL EARLY SHOW THAT SRI S. VENKATESWARA RAO HAS PAID AN AMO UNT OF RS. 7,05,000 THROUGH CHEQUES TO ASSESSEE MUCH PR IOR TO PAYMENT MADE BY M/S. SITARAMANJANEYA CONSTRUCTIO NS TO SRI S. VENKATESWARA RAO. THIS CERTAINLY GIVES A N IMPRESSION THAT SRI S. VENKATESWARA RAO HAS IN FACT SECURED THE PROPERTY FROM ASSESSEE BY MAKING PAYMEN T AND HAS SUBSEQUENTLY ENTERED INTO NEGOTIATION AND S OLD THE PROPERTY TO M/S. SITARAMANJANEYA CONSTRUCTIONS AT A HIGHER PRICE. IN THESE CIRCUMSTANCES, THE ASSESSIN G OFFICER IS NOT JUSTIFIED TO CONCLUDE THAT ASSESSEE HAD ACTUALLY RECEIVED SALE CONSIDERATION OF RS. 37.80 L AKHS SOLELY RELYING UPON THE STATEMENT OF SRI S. VENKATE SWARA RAO AND IN THE PROCESS TOTALLY IGNORING THE FACT TH AT SRI D. NAGARJUNA RAO, PARTNER OF M/S. SITARAMANJANEYA CONSTRUCTIONS HAD STATED THAT HE HAS PAID THE AMOUN T TO SRI S. VENKATESWARA RAO AND NOT ASSESSEE. IN THESE 17 ITA NO. 1936/HYD/2011 MS. S. MADHAVI ========================== CIRCUMSTANCES, THE ASSESSING OFFICER WITHOUT ALLOWI NG AN OPPORTUNITY TO ASSESSEE TO CROSS EXAMINE SRI S. VENKATESWARA RAO WAS NOT CORRECT IN MAKING THE ADDITION BY RELYING UPON THE STATEMENT OF SRI S. VENKATESWARA RAO. THE ASSESSING OFFICER HAVING NOT BROUGHT ANY OTHER CORROBORATIVE EVIDENCE ON RECORD TO ESTABLISH THAT ASSESSEE HAD ACTUALLY RECEIVED THE S ALE CONSIDERATION OF RS. 37.80 LAKHS THE COMPUTATION OF SHORT TERM CAPITAL GAINS MADE BY HIM CANNOT BE SUSTAINED. IN THE AFORESAID VIEW OF THE MATTER, WE HOLD THAT EVEN ON MERITS ALSO THE ADDITION MADE ON ACCOUNT OF SHORT T ERM CAPITAL GAINS WILL NOT SURVIVE. 17. SO FAR AS THE ADDITION OF RS. 3 LAKHS SUSTAINED BY THE CIT(A) IN RESPECT OF UNEXPLAINED INVESTMENT IN PURCHASE OF PROPERTY, WE ARE OF THE VIEW THAT THE S AME IS NOT JUSTIFIED CONSIDERING THE FACT THAT ASSESSEE HA S EXPLAINED THE SOURCE OF SUCH INVESTMENT BY PRODUCIN G NECESSARY EVIDENCE. IT IS A FACT ON RECORD THAT AS SESSEE AT THE TIME OF ASSESSMENT PROCEEDINGS AS WELL AS BEFOR E THE CIT(A) HAD STATED THAT THE AMOUNT OF RS. 3 LAKHS WA S RECEIVED FROM HER UNCLE WHO IS AN AGRICULTURIST AND SHE HAS ALSO FILED A CONFIRMATION IN SUPPORT OF SUCH CL AIM. THAT BEING THE CASE, IT IS NOT UNDERSTOOD WHAT MORE SUPPORTING EVIDENCE ASSESSEE COULD HAVE PRODUCED IN SUPPORT OF HER CLAIM. WHEN ASSESSEE HAS EXPLAINED HER SOURCE BY PRODUCING EVIDENCE IN THE FORM OF CONFIRM ATION IT IS DUTY OF THE DEPARTMENTAL AUTHORITIES TO MAKE ENQUIRY AND ASCERTAIN WHETHER ASSESSEE'S CLAIM IS CORRECT O R NOT. WITHOUT CONDUCTING ANY ENQUIRY, ASSESSEE'S CLAIM CA NNOT BE REJECTED MERELY ON DOUBTS AND SUSPICION. IN THE AFORESAID VIEW OF THE MATTER, WE HOLD THAT THE ADDI TION OF 18 ITA NO. 1936/HYD/2011 MS. S. MADHAVI ========================== RS. 3 LAKHS SUSTAINED BY THE CIT(A) IS TO BE DELETE D. ACCORDINGLY, ASSESSEE SUCCEEDS BOTH ON THE LEGAL IS SUE AS WELL AS ON THE MERITS OF THE ADDITIONS. 18. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 12 TH SEPTEMBER, 2014 SD/ - (B. RAMAKOTAIAH) ACCOUNTANT MEMBER SD/ - (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 12 TH SEPTEMBER, 2014 TPRAO COPY TO: 1. MS. S. MADHAVI , C/O. SRI S. RAMA RAO, ADVOCATE, FLAT NO. 102, SHRIYA'S ELEGANCE, H. NO. 3-6-643, ST. NO. 9, HIMAYATNAGAR, HYDERABAD-500 029. 2. THE ASST. CIT, CIRCLE - 8(1) , KARIMNAGAR . 3 . THE CIT(A) - III , HYDERABAD . 4 . THE CIT - II, HYDERABAD. 5 . THE DR, B - BENCH, ITAT, HYDERABAD.