Dy. Commissioner of Income Tax , Central Circle-2(4), Hyderabad V. Haritha Mohana Agro Projects Private Limited, Hyderabad

ITA 218/Hyd/2018

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 9795 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-B
• Next Hearing Date: 18-10-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 29-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Validity of assessment; Documents seized; TDS; Set aside
• Section: 148; 132; 144; 15; 142(1); 13; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “B” : HYDERABAD BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER S.No ITA No. A.Y. Appellant Respondent 1 1667/Hyd/2018 2011-12 Nagavalli Planters (P) Ltd, Hyderabad PAN:AACCN5193Q ACIT Circle 2(4) Hyderabad DCIT Central Circle 2(4) Hyderabad 2 1668/Hyd/2018 2014-15 3 197/Hyd/2018 2014-15 RL Avenues (P) Ltd Hyderabad PAN:AACER4280Q DCIT, Central Circle 2(4) Hyderabad 4 198/Hyd/2018 2011-12 5 200/Hyd/2018 2014-15 Alder Infra Ventures (P) Ltd Vijayawada PAN:AAHCA8544P DCIT, Central Circle 2(4) Hyderabad 6 1666/Hyd/2018 2014-15 Budha Plaita Timber Estates P Ltd, Vijayawada PAN:AADCB3447N ACIT Circle 2(1) Vijayawada DCIT Central Circle 2(4) Hyderabad 7 203/Hyd/2018 2011-12 Haritha Mohana Agro Projects (P) Ltd, Hyderabad PAN:AABCH8633E DCIT central Circle 2(4) Hyderabad 8 204/Hyd/2018 2014-15 9 215/Hyd/2018 2011-12 DCIT central Circle 2(4) Hyderabad Haritha Mohana Agro Projects (P) Ltd, Hyderabad PAN:AABCH8633E 10 218/Hyd/2018 2014-15 DCIT central Circle 2(4) Hyderabad Haritha Mohana Agro Projects (P) Ltd, Hyderabad PAN:AABCH8633E 11 578/Hyd/2018 2014-15 Karisma Township (P) Ltd, Vijayawada PAN:AADCK5263H DCIT central Circle 2(4) Hyderabad 12 582/Hyd/2018 2014-15 Haritha Prabha Agro Projects (P) Ltd, Vijayawada PAN:AABCH8326D DCIT central Circle 2(4) Hyderabad 13 584/Hyd/2018 2014-15 Alluru Timber Estates (P) Ltd Vijayawada PAN:AAGCA7801C DCIT central Circle 2(4) Hyderabad 14 592/Hyd/2018 2014-15 Sahja Timber Projects (P) Ltd Vijayawada PAN:AALCS1001R DCIT central Circle 2(4) Hyderabad :- 2 -: 15 593/Hyd/2018 2012-13 Pulane Constructions (P) Ltd Vijayawada PAN:AAECP7794D DCIT central Circle 2(4) Hyderabad 16 594/Hyd/2018 2014-15 17 595/Hyd/2018 2014-15 Carnelian Builders & Developers (P) Ltd Hyderabad PAN:AADCC7127L DCIT central Circle 2(4) Hyderabad 18 597/Hyd/2018 2011-12 Rupika Infra Ventures (P) Ltd Vijayawada PAN:AAECR5687B DCIT central Circle 2(4) Hyderabad 19 599/Hyd/2018 2014-15 Cholapadam Agro Projects (P) Ltd, Vijayawada PAN:AADCC2695R DCIT central Circle 2(4) Hyderabad 20 602/Hyd/2018 2014-15 Green Mangoes Real Estates India (P) Ltd, Hyderabad PAN:AADCG2344M DCIT central Circle 2(4) Hyderabad 21 606/Hyd/2018 2014-15 Shakthi Priya Projects (P) Ltd, Hyderabad PAN:AAKCS9821L DCIT central Circle 2(4) Hyderabad 22 1659/Hyd/2018 2012-13 Palesa Constructions (P) Ltd Vijayawada PAN:AAECP7792F DCIT central Circle 2(4) Hyderabad 23 1663/Hyd/2018 2014-15 Avaindra Infra Ventures (P) Ltd, Vijayawada PAN:AAHCA0266E DCIT central Circle 2(4) Hyderabad 24 1664/Hyd/2018 2014-15 Aniij Realtors (P) Ltd Vijayawada PAN:AAHCA0267F DCIT central Circle 2(4) Hyderabad 25 800/Hyd/2018 2011-12 DCIT central Circle 2(4) Hyderabad Nagavalli Planters (P) Ltd Vijayawada PAN:aAACCN5193Q 26 801/Hyd/2018 2014-15 27 212/Hyd/2018 2012-13 DCIT central Circle 2(4) Hyderabad Budha Palita Timber Estates (P) Ltd, Vijayawada PAN:AADCB3447N 28 763/Hyd/2018 2013-14 29 764/Hyd/2018 2014-15 30 1172/Hyd/2018 2014-15 DCIT central Circle 2(4) Hyderabad Amrutha Agro Estates (P) Ltd, Vijayawada PAN:AAGCA7865E For Assessees : Shri M.V. Prasad, CA For Revenue : Shri K. Madhusudan, CIT(DR) Date of Hearing: 20/10/2022; Date of pronouncement: 25 /10/2022 :- 3 -: O R D E R PER BENCH : The above batch of appeals filed by the assessee and the Revenue are directed against the respective orders of the CIT(A) for the relevant A.Ys mentioned therein. Since common issues are involved in all these appeals, therefore, all these appeals were heard together and are being disposed of by this common order. 2. First we take up ITA No.1668/Hyd/2018 as the lead case. Both the parties agreed that the outcome of the result in this case shall be followed in other appeals. 2.1 There is a delay of 88 days in filing of these appeals by the assessee for which the assessee has filed condonation application along with affidavit of the assessee explaining the reasons for such delay. After considering the contents of the condonation application and after hearing the learned DR, the delay in filing of this appeal by the assessee is condoned and the appeals are admitted for adjudication. 2.2 Facts of the case, in brief, are that the assessee is a company engaged in the business of real estate. It filed its original return of income for the A.Y 2014-15 on 29 th November, 2014 declaring loss of Rs.6,73,32,549/-. A search and seizure action u/s 132 of the I.T. Act was conducted in Agrigold Farm Estates India (P) Ltd and group of cases on 23.01.2015. Last of the authorization was executed on 23.03.2015. During the course of search, :- 4 -: incriminating material belonging to the assessee company was found and seized. After recording the satisfaction note, notice u/s 153C of the Act was issued on 20.11.2015 calling for the return of income and the same was duly served on the assessee. However, the assessee did not respond to the said notice for which notice u/s 142(1) was subsequently issued. Even then also there was no compliance for which the Assessing Officer proceeded to complete the assessment u/s 144 of the I.T. Act. 2.3 The Assessing Officer noted that during the course of search & seizure operations, the following documents/books of account/loose papers were found and seized: A) Annexure-A/AGFEIPL/02 (Folder containing loose sheets) to the Panchanama dated 23.01.2015 drawn at the premises of 40-1-24, Venkateswara Puram, Post Office Building, Labbipet, Vijayawada, B) Annexure-A/AGFEIPL/04(Hard Disk Drive) to the Panchanama dated 23.01.2015 drawn at the premises of 40-1-24, Venkateswarapuram, Post Office Building, Labbipet, Vijayawada. 3. He noted that in the previous year relevant to the A.Y under consideration, the assessee company (Transferee) received: a) Share of M/s. Budha Palitha Timber Estates (P) Ltd, which were transferred by M/s. Haritha Agro and Timber Estates (P) Ltd (Transferor) on 1.10.2013. :- 5 -: b) Shares of M/s. Dreamland Ventures (P) Ltd which were transferred by M/s.Agri Gold Constructions (P) Ltd (Transferor) on 1.10.2013. For a consideration less than aggregate fair market fair market value of the shares, the details of which are as under: Details of shares Transferor concern No.of shares Price at which transferred Fair Market value of shares Difference (f-e) deemed as income u/s 56(2)(via)(ii) Shares of M/s. Budha Palitha Timber Estates (P) Ltd M/s. Haritha Agro and Timber Estates (P) Ltd 1800 1,85,31,000 2,90,33,308 1,04,92,308 Shares of M/s. Dreamland Ventures (P) Ltd M/s. Agri Gold Constructions (P) Ltd 309000 23,78,11,200 25,62,72,240 1,84,61,040 TOTAL 2,89,53,348 3.1 The Assessing Officer accordingly made addition of the same to the total income of the assessee. The Assessing Officer similarly made addition of Rs.3,55,37,896/- being profit @ 15% of the gross receipts of Rs.23,69,19,307/- excluding interest income. The Assessing Officer also made addition of Rs.1,45,27,397/- on account of interest income. Thus, the Assessing Officer determined the total income of the assessee at Rs.7,90,18,641/-. 4. Before the learned CIT (A), the assessee apart from challenging the addition on merit challenged the validity of assessment u/s 153C of the Act. However, the learned CIT (A) was not satisfied with the arguments advanced by :- 6 -: the assessee challenging the validity of the assessment u/s 153C and dismissed the same by observing as under: “6.1 As for the plea taken by the appellant’s AR, in the revised grounds of appeal, that assessment u/s 153C is invalid because the Assessing Officer had issued notice u/s 153C without referring to any incriminating material, this ground is clearly unsustainable, since the assessment order itself clearly mentions that during the course of search on M/s. Agrigold group of cases, incriminating material belonging to the assessee company was found and seized, and proceedings u/s 153C were initiated after duly recording the satisfaction note. The issuance of notice u/s 153C by the Assessing Officer is therefore, completely lawful, and grounds related to this issue are DISMISSED”. 4.1 So far as the addition on merit is concerned, the learned CIT (A) gave part relief on the addition of deemed income u/s 56(2)(via)(ii) by directing the Assessing Officer to adopt the revised working for the calculations of the fair market value of the shares after considering TDS and advance tax. So far as the estimation of profit at 15% of the gross receipts is concerned, the learned CIT (A) after obtaining the remand report from the Assessing Officer restricted the same to 5% of the turnover. So far as the interest income is concerned, the learned CIT (A) directed the Assessing Officer to treat the income as business income. 5. Aggrieved with such order of the learned CIT (A), the assessee is in appeal before the Tribunal by raising the following grounds of appeal: “ 1. The learned CIT (Appeals) erred in facts and law while passing the order. 2. Whether on the facts and in the circumstance of the case and in law, the learned CIT(Appeals) unjustified in upholding :- 7 -: addition under the deemed income as Section 153C is applicable which pertains to incriminating material. 3. Whether on the facts and in the circumstance of the case and in law, the learned CIT(Appeals) was unjustified in holding that assessment under section 153C could be made even when no incriminating material found in the search. 4. The learned CIT(Appeals) unjustified in holding the AO contention that is calculating the Fair market value without deducting the Fictitious Assets which is form part of the fixed Assets for invoking the provisions U/s 56(2)(vii)(a). 5. On the facts and circumstances of the case the learned CIT(Appeals) is unjustified in confirming the addition made U/s 56(2) which is related to deemed income and there is no incriminating material. 6. On the facts and circumstances of the case the learned CIT(Appeals) is erred in dismissing the appeal with respect to the validity of assessment U/s 153C. 7. On the facts and circumstances of the case, the CIT(Appeals) erred in quoting the case law i.e. E.N.Gopakumar Vs CIT(Central) (2016) 75 Taxmann.com 215(Kerala) which is distinguishable to the present case. 8. On the facts and circumstances of the case, the CIT(Appeals) is unjustified in confirming the addition made by AO without observing the fact that the additions were made not on the basis of incriminating material but based on the figures which are already in the balance Sheet filed along with the return of income U/s 139(1). 9. The Appellant craves to leave, to add, to amend and / or to alter any of grounds of appeal, if need be.” 6. The learned Counsel for the assessee at the outset drew the attention of the Bench to the satisfaction note which is as under: :- 8 -: 7. Referring to the above satisfaction recorded by the Assessing Officer, he submitted that the Assessing Officer in the instant case has recorded the reasons for initiation of proceedings as per the provisions of section 148 and has not his recorded his satisfaction that the documents so seized belong to the assessee company i.e., other than the searched person and therefore, initiation of proceedings u/s 153C without such proper satisfaction :- 9 -: are bad in law and therefore, the same has to be quashed. Further, even if the last line of the satisfaction note so produced by the Revenue which now shows that the same is for initiation of 148 proceedings and not 153C proceedings is accepted as notice u/s 153C then also the satisfaction of the Assessing Officer regarding the seized material belonging or relating to some other person should not to be arrived at in a casual manner or merely on the basis of statement made by the person searched. It should be based upon cogent material and must display the reason or basis for the conclusion that the Assessing Officer of the person in respect of whom the search was conducted is satisfied that the seized document belongs to another person. He submitted that in the preset case nowhere the Assessing Officer recorded his satisfaction that the material or seized hard disk/document belongs to the assessee company, therefore, such satisfaction itself is invalid. 8. Referring to the decision of the Hon'ble Supreme Court in the case of Super Malls Pvt Ltd vs. Pr.CIT New Delhi (2020) 115 Taxmann.com 105 (S.C), he drew the attention of the Bench to the following observation: “When proceedings are proposed to be initiated u/s 153C of the Act against the ‘other person”, it has to be preceded by a satisfaction note by the Assessing Officer of the searched person. It is further observed that he will record in his satisfaction note that the seized documents belong to “other person”. That in the present case there was no satisfaction note by the Assessing Officer of the searched person. That there is a non- compliance of the provisions of section 153C of the Act as well as even the Circular issued :- 10 -: by the CBDT and therefore, the learned ITAT rightly set aside the assessment order”. 9. Referring to various other decisions filed in the case law compilation and written submission, he submitted that the satisfaction recorded by the Assessing Officer in the instant case is an improper satisfaction and failed to indicate and record the very vital ingredients that is “belongs to the person other than searched person” in such satisfaction. 10. Referring to the provisions of section 153C of the Act, he submitted that prior to amendment by the Finance Act, 2015 w.e.f. 1.6.2015, the provisions of section 153C read as under: “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, jewellery or other valuable article or thing or books account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against 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”. 11. He submitted that since the search in the instant case took place on 23.1.2015 and the Assessing Officer nowhere has mentioned that the documents belonging to the assessee were found from the searched person, therefore, the subsequent issuance of notice u/s 153C on such satisfaction amounts to improper jurisdiction and therefore, the 153C proceedings should be quashed. :- 11 -: 11.1 Referring to the decision of the Coordinate Bench of the Tribunal in the case of related concerns, he submitted that the Coordinate Bench of the Tribunal has restored the issue to the file of the Assessing Officer with certain directions. He accordingly submitted that he has no objection if the matter is restored to the file of the Assessing Officer with similar directions. 11.2 So far as the grounds challenging the merit of the additions are concerned, he didn’t press for the same. 12. The learned DR, on the other hand, submitted that the seized documents marked as Annexure A/AGFEIPL/04 were found and seized from the searched party which contain various loose sheets etc. It is not conclusively proved that the documents do not belong to the assessee. He accordingly submitted that this issue may be restored to the file of the Assessing Officer with a direction to verify the record and find out as to whether any document belonging to the assessee was found during the course of search and accordingly decide the issue. 13. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the learned CIT (A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer, on the basis of information obtained marked as Annexure A/AGFWIPL/02 and A/AGFEIPL/04 that these incriminating materials belong to the assessee company invoked the provisions of section 153C and accordingly :- 12 -: issued notice u/s 153C of the Act. As per the assessment order, the following documents and list of papers were found and seized: a. Annexure-A/AGFEIPL/02 (Folder containing loose sheets) to the Panchanama dated 23.01.2015 drawn at the premises of 40-1-24, Venkateswara Puram, Post Office Building, Labbipet, Vijayawada. b. Annexure-A/AGFEIPL/04 (Hard Disk Drive) to the Panchanama dated 23.01.2015 drawn at the premises of 40-1-24, Venkateswarapuram, Post Office Building, Labbipet, Vijayawada 13.1. He further noted that for the impugned assessment year, the assessee company (Transferee) received : a) Shares of M/s.Agri Gold Construction P Ltd., were transferred by M/s.HarithaMohana Agro Projects P Ltd. (Transferor) on 28-3-2011. b) Shares of M/s.Agri Gold Farm Estates India P Ltd., were transferred by M/s.HarithaMohana Agro Projects P Ltd. (Transferor) on 30-3-2011. 14. It is the submission of the learned Counsel for the assessee that these documents do not belong to the assessee and therefore, the initiation of proceedings u/s 153C are not in accordance with law. It is also his submission that the provisions of section 153C were amended w.e.f. 1.6.2015. As per 153C(i)(b), the words “any :- 13 -: books of account or documents seized or requisitioned, pertains or pertained to or any information contained therein relates to” are applicable w.e.f. 1.6.2015. Since the search in the instant case was conducted on 23.1.2015 and completed on 23.3.2015, which is before 1.6.2015, therefore, the initiation of proceedings u/s 153C are not in accordance with law. It is also his submission that as per the copy of the satisfaction note produced by the Revenue, the same is for initiation of proceedings u/s 148 and not for 153C proceedings. 14.1 We find some force in the above argument of the learned Counsel for the assessee. A perusal of the satisfaction note produced by the Revenue, contents of which have been reproduced in the preceding paragraphs shows that that the same is for initiation of proceedings u/s 148 and not for initiation of proceedings u/s 153C. Further, a perusal of the satisfaction note, assuming the same to be for initiation of proceedings u/s 153C, does not clearly show that the documents so seized belongs to the assessee. Since the provisions of 153C were amended w.e.f. 1.6.2015 to include books of account or documents seized of requisitions pertains or pertained to or any information contained there relate to a person other than the searched person, therefore, for valid initiation of proceedings u/s 153C for the impugned A.Y, documents belonging to the person other than the searched person is a must. However, in the instant case, the satisfaction note of the Assessing Officer does not clearly show that the documents so found during the course of search belong to the assessee i.e. other than the searched person. :- 14 -: 14.2 We find identical issues had come up before the Coordinate Bench of the Tribunal in the group cases. We find the Tribunal vide ITA Nos. 194 to 196 in the case of RL Avenue (P) Ltd vs. DCIT for A.Y 2013-14 order dated 30.8.2022 has decided identical issue and restored the issue to the file of the Assessing Officer with certain directions. The relevant observation of the Tribunal from Para 18 onwards reads as under: ” 18. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the learned CIT (A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer, on the basis of information obtained marked as Annexure A/AGFWIPL/02 and A/AGFEIPL/04 that these incriminating materials belong to the assessee company invoked the provisions of section 153C and accordingly issued notice u/s 153C of the Act. As per the assessment order, the following documents and list of papers were found and seized: a. Annexure-A/AGFEIPL/02 (Folder containing loose sheets) to the Panchanama dated 23.01.2015 drawn at the premises of 40-1-24, Venkateswara Puram, Post Office Building, Labbipet, Vijayawada. b. Annexure-A/AGFEIPL/04 (Hard Disk Drive) to the Panchanama dated 23.01.2015 drawn at the premises of 40-1-24, Venkateswarapuram, Post Office Building, Labbipet, Vijayawada 18.1. He further noted that for the impugned assessment year, the assessee company (Transferee) received : a) Shares of M/s.Agri Gold Construction P Ltd., were transferred by M/s.HarithaMohana Agro Projects P Ltd. (Transferor) on 28-3-2011. b) Shares of M/s.Agri Gold Farm Estates India P Ltd., were transferred by M/s.HarithaMohana Agro Projects P Ltd. (Transferor) on 30-3-2011. 19. It is the submission of the learned Counsel for the assessee that these documents do not belong to the assessee and therefore, the initiation of proceedings u/s 153C are not in accordance with law. It is also his submission that the provisions :- 15 -: of section 153C were amended w.e.f. 1.6.2015. As per 153C(i)(b), the words “any books of account or documents seized or requisitioned, pertains or pertained to or any information contained therein relates to” are applicable w.e.f. 1.6.2015. Since the search in the instant case was conducted on 23.1.2015 and completed on 23.3.2015, which is before 1.6.2015, therefore, the initiation of proceedings u/s 153C are not in accordance with law. 20. We find some force in the above argument of the learned Counsel for the assessee. Admittedly, the search in the instant case took place on 23.1.2015 in the case of M/s. Agrigold Farm Estates India (P) Ltd. The last authorization was executed on 23.3.2015. A perusal of the satisfaction note does not clearly show that the document so seized belongs to the assessee. Since the provisions of section 153C were amended w.e.f. 1.6.2015 to include books of account or documents seized or requisitioned pertains or pertained to or any information contained therein relate to a person other than the searched person, therefore, for valid initiation of proceedings u/s. 153C for the impugned assessment year, documents belong to the person other than the searched person is a must. However, in the instant case, the satisfaction note of the Assessing Officer does not clearly show that the documents so found during the cource of search belong to the assessee i.e., other than the searched person. We, therefore, deem it proper to restore the issue to the file of the Assessing Officer with a direction to give a categorical finding that the documents so seized from the premises of Agrigold Farm Estates India (P) Ltd and group cases belong to the assessee. In case the documents so found and seized during the course of search does not belong to the assessee, then the proceedings so initiated u/s 153C being not in accordance with law has to be quashed. Needless to say, the Assessing Officer shall give due opportunity of being heard to the assessee and decide the issue. We hold and direct accordingly. The grounds including the additional grounds challenging the validity of initiation of proceedings u/s 153C are accordingly allowed for statistical purposes. 15. Since the assessee in the instant case has also not pressed for the grounds on merits and since the issue of validity of 153C proceedings have been restored to the file of the Assessing Officer with certain directions, therefore, following the decision of the Coordinate Bench of the Tribunal (cited Supra), we restore the issue to the file of the Assessing Officer with similar directions. :- 16 -: 16. So far as the grounds on merit are concerned, as mentioned earlier, the learned Counsel for the assessee did not press these grounds for which the learned CIT-DR has no objection. Accordingly, these grounds are dismissed. 17. In the result, appeal filed by the assessee is partly allowed for statistical purposes. 18. In the remaining appeals, identical grounds have been taken. Following our reasonings in the preceding paragraphs, we restore all these appeals to the file of the Assessing Officer with similar directions. 19. In the result, all the above appeals filed by the respective assessees/Revenue are partly allowed for statistical purposes. Pronounced in the Open Court on 25 th October, 2022 Sd/- Sd/- ( LALIET KUMAR) ( R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated: 25 th October, 2022 VINODAN/SPS Copy to: S.No Addresses 1 All Assessees : C/o Shri M.V. Prasad, C.A, D.No.60-7-13, 4 th Lane, Siddharth Nagar, Vijayawada 520010 2 DCIT/ACIT Central Circle-2(4) 6 th Floor, Aayakar Bhavan, Basheerbagh, Hyderabad 500029 3 CIT (A)-12, Hyderabad 4 Pr. CIT (Central) Hyderabad 5 DR, ITAT Hyderabad Benches 6 Guard File :- 17 -: By Order