A.Ammaji, Visakhapatnam V. THE ACIT, Visakhapatnam

ITA 343/VIZ/2014

• Counselvise Citation: 34325314 RSA 2014
• Duration Of Justice: 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-07-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 06-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K V N CHARYA
• Keywords: Unexplained cash credit; Search and seizure; Loose papers; Document seized; Documents seized
• Section: 143(3); 153A; 68; 132; 2

Judgement Text

ITA NOS.337 TO 343/VIZAG/2014 A. AMMAJI, VSKP IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NOS.337 TO 343/VIZAG/2014 ASSESSMENT YEAR S : 200 2 - 0 3 TO 2008 - 0 9 RESPECTIVELY A. AMMAJI VISAKHAPATNAM VS. ACIT CENTRAL CIRCLE-2 VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.ABHPA 0658E ASSESSEE BY: SHRI G.V.N. HARI, ADVOCATE REVENUE BY: SHRI K.V.N. CHARYA, CIT(DR) DATE OF HEARING : 10.07.2014 DATE OF PRONOUNCEMENT : 21.07.2014 ORDER PER BENCH:- THESE ARE BUNCH OF SEVEN APPEALS BY THE ASSESSEE A GAINST A COMMON ORDER DATED 2.4.2014 OF THE CIT(A), VISAKHAPATNAM P ERTAINING TO THE ASSESSMENT YEARS 2002-03 TO 2008-09. ITA NOS.337 TO 342/VIZAG/2014: 2. FACTS BEING IDENTICAL AND GROUNDS BEING COMMON I N ALL THESE APPEALS EXCEPT AMOUNTS, FOR SAKE OF CONVENIENCE WE WILL DEA L WITH THE FACTS RELATING TO ITA NO.337/VIZAG/2014. THE FIRST ISSUE IS REGAR DING VALIDITY OF PROCEEDING U/S 153C OF THE ACT. 3. FOR THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE F ILED RETURN OF INCOME IN REGULAR COURSE ON 30.10.2002 ADMITTING NI L INCOME BESIDES AGRICULTURAL INCOME OF RS.4,01,500/-. AS A RESULT OF SEARCH AND SEIZURE OPERATION U/S 132 OF THE ACT IN CASE OF SHRI A.T. R AYUDU (INDIVIDUAL) ON 4.12.2007, THE ASSESSING OFFICER ISSUED A NOTICE U/ S 153C OF THE ACT CALLING UPON THE ASSESSEE TO FILE RETURN OF INCOME. ASSES SEE COMPLYING TO THE SAID NOTICE, RETURNED THE SAME INCOME AS DECLARED ORIGIN ALLY. IN COURSE OF THE ITA NOS.337 TO 343/VIZAG/2014 A. AMMAJI, VSKP 2 ASSESSMENT PROCEEDING, THE ASSESSING OFFICER WHILE EXAMINING THE AUTHENTICITY CLAIM OF AGRICULTURAL INCOME CONDUCTED ENQUIRY THRO UGH HIS INSPECTOR AND ON THE BASIS OF SUCH ENQUIRY HELD THAT THE ASSESSEES CLAIM OF AGRICULTURAL INCOME CANNOT BE ACCEPTED AND ACCORDINGLY TREATED AS UNEXP LAINED CREDIT U/S 68 OF THE ACT. 4. BEING AGGRIEVED OF SUCH ADDITION, THE ASSESSEE P REFERRED APPEAL BEFORE THE CIT(A) CHALLENGING THE VALIDITY OF THE PROCEEDI NG U/S 153C OF THE ACT AS WELL AS ON THE MERITS OF THE ADDITION. THE CIT(A) WHILE UPHOLDING THE VALIDITY OF THE PROCEEDING INITIATED U/S 153C OF THE ACT GRA NTED PARTIAL RELIEF WITH REGARD TO THE CLAIM OF AGRICULTURAL INCOME. 5. WE HAVE HEARD THE PARTIES PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. WE HAVE DEALT WITH IDENTICAL ISSUE IN CASE OF M/S. AVINASH ESTATES & RESORTS LTD . IN ITA NOS.299 TO 302/VIZAG/2014 DATED 4.7.2014, AN ASSESSEE OF THE S AME GROUP, WHERE IN THE BENCH HAS HELD AS UNDER: 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE MATERIALS ON RECORD AS WELL AS THE ORDERS OF TH E REVENUE AUTHORITIES. SECTION 153C OF THE ACT POSTULATES THAT IN COURSE O F SEARCH AND SEIZURE OPERATION CONDUCTED IN CASE OF AN ASSESSEE IF MONEY , BULLION, JEWELLERY, BOOKS OF ACCOUNTS AND OTHER DOCUMENTS PERTAINING TO ANOTHER PERSON IS FOUND AND SEIZED, THEN PROCEEDING U/S 153C OF THE A CT CAN BE INITIATED BY THE ASSESSING OFFICER AFTER RECORDING SATISFACTION. THEREFORE, THE MONEY, BULLION, JEWELLERY, VALUABLE ARTICLE, THINGS, BOOKS OF ACCOUNTS OTHER DOCUMENTS REFERRED TO IN SECTION 153C OF THE ACT WO ULD MEAN THAT THOSE ARTICLES OR THINGS ARE IN NATURE OF INCRIMINATING M ATERIAL AND INDICATE CONCEALED/SUPPRESSED INCOME OF THE ASSESSEE. ON A PERUSAL OF THE ASSESSMENT ORDER, IT IS NOT FORTHCOMING, WHAT ARE T HE SEIZED MATERIALS ON THE BASIS OF WHICH THE ASSESSING OFFICER HAS INITIA TED PROCEEDINGS U/S 153C OF THE ACT. HOWEVER, A REFERENCE TO THE ORDER PASSED BY LD. CIT(A) WOULD REVEAL THAT THE SO CALLED INCRIMINATING MATER IALS FOUND AND SEIZED AS BELONGING TO THE ASSESSEE ARE AS UNDER:- M/S. AVNASH ESTATES & RESORTS PVT. LTD. S.NO. ANNEXURE NO DETAILS MATERIAL FOUND IN ANNEXURE 1 ATR/B/2 PAGE NOS.12 TO 15 PAGE NOS.76 TO 78 INVESTMENT DETAILS IN THE PROJECT OXYGEN SERVICED APARTMENTS BY M/S. AVNASH ESTATES & RESORTS LTD. PROVISIONAL PROFIT & LOSS ACCOUNT AND BALANCE SHEET OF M/S. AVNASH ESTATES & RESORTS LTD. AS ON 31.03.2007 ITA NOS.337 TO 343/VIZAG/2014 A. AMMAJI, VSKP 3 2 A/ATRR/1 PAGE NOS.57 TO 73 DEVELOPMENT AGREEMENT CUM GENERAL POWER OF ATTORNEY EXECUTED BY SHRI I. SURYANARAYANA RAO AND OTHERS IN FAVOUR OF M/S. AVNASH ESTATES AND RESORTS PVT. LTD. ON 15.12.2006 AT KAKINADA. 3 ATR/B/PO2/2 PAGE NOS.6 TO 9 UNSIGNED CASH PAYMENT VOUCHERS. 8. A REFERENCE TO THE ASSESSMENT ORDER IN THE CON TEXT OF THE AFORESAID SEIZED MATERIAL WOULD SHOW THAT THE ADDIT ION MADE IN THE ASSESSMENT ORDER HAS NO RELEVANCE OR CONNECTION TO THE AFORESAID SEIZED MATERIALS ON THE BASIS OF WHICH PROCEEDING HAS BEEN INITIATED U/S 153C OF THE ACT. FURTHER, NOWHERE IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS REFERRED TO THESE SEIZED MATERIALS TO SAY THAT AS A RESULT OF SUCH SEIZED MATERIALS, UNDISCLOSED INCOME OF THE ASSESSE E HAS BEEN UNEARTHED. IN THE AFORESAID FACTS, THE SO CALLED SE IZED MATERIALS CANNOT BE CONSIDERED TO BE INCRIMINATING MATERIALS SO AS T O EMPOWER THE ASSESSING OFFICER TO INITIATE PROCEEDINGS U/S 153C OF THE ACT. SECTION 153C OF THE ACT CANNOT BE INTERPRETED IN A MANNER T O CONTEMPLATE THAT ANY MATERIAL WHICH HAS A REFERENCE TO THE ASSESSEE, WHETHER IT IS INCRIMINATING OR NOT CAN BE USED AS A TOOL TO LAUNC H A PROCEEDING U/S 153C OF THE ACT. IF SECTION 153C OF THE ACT IS TO B E INTERPRETED IN SUCH A NARROW MANNER THEN ANY INNOCUOUS MATERIAL FOUND DUR ING A SEARCH OF THIRD PARTY AND HAS ANY REFERENCE TO THE ASSESSEE T HEN IT WILL LEAD TO A PROCEEDING U/S 153C OF THE ACT. THAT CANNOT BE THE INTENTION OF LEGISLATURE. AS WOULD BE CLEAR FROM THE ASSESSMENT ORDER, THE INCOME WHICH THE ASSESSING OFFICER HAS SOUGHT TO ASSESS IN THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT READ WITH SECTION 153C OF THE ACT HAS ALREADY BEEN REFLECTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE MAINTAINED IN REGULAR COURSE AS WELL AS DISCLOSED I N THE RETURN OF INCOME FILED BY THE ASSESSEE PRIOR TO THE SEARCH. ONLY ON THE BASIS OF SOME ENQUIRY CONDUCTED AT THE TIME OF ASSESSMENT PROCEED INGS, THE ASSESSING OFFICER HAS FORMED AN OPINION THAT THE AGRICULTURAL INCOME REFLECTED IN THE BOOKS OF ACCOUNTS AND DISCLOSED IN THE RETURN OF IN COME IS UNEXPLAINED. IT IS PATENT AND OBVIOUS FROM THE ASSESSMENT ORDER T HAT AO HAS ACCEPTED THE INCOME DECLARED BY THE ASSESSEE ORIGINALLY EXCE PT TINKERING WITH THE AGRICULTURAL INCOME SHOWN BY TREATING IT AS UNEXPLA INED CREDIT U/S 68 OF THE ACT. IN FACT NO OTHER ADDITION HAS BEEN MADE B Y THE AO WITH RELATION TO ANY MATERIAL SEIZED DURING SEARCH. IN THESE CIR CUMSTANCES, WE FAIL TO UNDERSTAND THE PURPOSE OF INITIATING PROCEEDING U/S 153C OF THE ACT. EVEN IN RESPECT OF ADDITION MADE U/S 68 OF THE ACT ALSO THE AO SUBSEQUENTLY IN HIS REMAND REPORT HAS ACCEPTED THAT THE INCOME IS IN NATURE OF AGRICULTURAL INCOME. WHEN THE INCOME HAS ALREADY BEEN REFLECTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND DISCLOSED IN THE RETURN OF INCOME MUCH PRIOR TO THE INITIATION OF PR OCEEDINGS U/S 153C OF THE ACT, THERE IS NO JUSTIFICATION ON THE PART OF T HE ASSESSING OFFICER TO INITIATE PROCEEDINGS U/S 153C OF THE ACT TO ASSESS SUCH INCOME AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. THE ASS ESSING OFFICER CERTAINLY IS NOT EMPOWERED UNDER THE ACT TO CONSIDER THE ISSU ES IN A SEARCH ASSESSMENT, WHICH CAN BE CONSIDERED IN REGULAR ASSE SSMENT. THE ITAT ITA NOS.337 TO 343/VIZAG/2014 A. AMMAJI, VSKP 4 VIZAG BENCH IN CASE OF ACIT VS. SRI RAM EDUCATIONAL TRUST (SUPRA) WHILE CONSIDERING THE POWERS OF THE ASSESSING OFFICER IN INITIATING PROCEEDINGS U/S 153C OF THE ACT HAS HELD AS UNDER: THAT BESIDES, THERE ARE NO INCRIMINATING MATERIALS INDICATING ANY UNDISCLOSED INCOME OF THE ASSESSEE, WHICH COULD HAVE ENABLED THE AO TO INVOKE THE PROVISIONS OF SECTION 153C OF THE ACT. THIS BECOMES FURTHER CLEA R FROM THE FACT THAT THE INCOME WERE DETERMINED FOR THE ASSESSMENT YEARS 2001-02, 2002-03 & 2003-04 ONLY ON THE GROUND THAT THE ASSESSEE HAS NOT BEEN APPROVED UNDE R SECTION 10(23C) OF THE ACT. THE DETERMINATION OF I NCOME HAS ABSOLUTELY NO RELATION OR RELEVANCE TO THE SEIZ ED MATERIALS. SO FAR AS THE ASSESSMENT YEARS 2004-05 AND 2005-06 ARE CONCERNED, PERUSAL OF THE ASSESSMENT OR DERS PASSED IN THOSE YEARS WOULD REVEAL THE FACT THAT TH E DETERMINATION OF INCOME IS ON THE BASIS OF THE IMPO UNDED MATERIALS AS A RESULT OF SURVEY AND NOT ON THE BASI S OF ANY SEIZED MATERIALS BELONGING TO THE ASSESSEE. IN THE AFORESAID CIRCUMSTANCES, THE PRE CONDITIONS FOR ASSUMING JURI SDICTION UNDER SECTION 153C ARE NOT SATISFIED. SO FAR AS TH E DECISIONS RELIED UPON BY LD. D.R. IN SUPPORT OF HIS CONTENTIO N, AFTER CAREFULLY APPLYING OUR MIND TO THE RATIO LAID DOWN THEREIN, WE OBSERVE THAT THE DECISIONS ARE DISTINGUISHABLE O N FACTS AND DO NOT APPLY TO THE FACTS OF THE ASSESSEES CAS E. IN THAT VIEW OF THE MATTER, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN HOLDING THE INITIATION OF PROCEEDI NGS UNDER SECTION 153C TO BE AB INITIO VOID AND CONSEQUENTLY ANNULLING THE ASSESSMENTS FOR ALL THE AFORESAID ASSESSMENT YE ARS. ACCORDINGLY, WE UPHOLD THE SAME BY DISMISSING THE G ROUNDS TAKEN BY THE DEPARTMENT. 9. THE ITAT VIZAG BENCH AGAIN IN CASE OF GADIRAJU V ENKATA SUBBA RAJU VS. DCIT AND ANOTHER ITA NO.360 & 361/VIZAG/2013 DA TED 5.3.2014 CONSIDERING IDENTICAL ISSUE ON PROCEEDING INITIATED U/S 153C OF THE ACT IN ABSENCE OF INCRIMINATING MATERIAL HELD AS UNDER: 9. WE HAVE HEARD THE CONTENTIONS OF THE PARTIES AN D PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WE LL AS OTHER MATERIALS ON RECORD. WE HAVE ALSO CAREFULLY APPLIE D OUR MIND TO THE DECISIONS RELIED UPON BY THE PARTIES. IT IS APPARENT FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICE R HAS PROCEEDED U/S 153C OF THE ACT. HOWEVER, WE MAY OBS ERVE THAT WHILE DEALING WITH ASSESSEES GROUND ON THIS I SSUE IN PARA-7 OF HIS ORDER EXTRACTED HEREIN ABOVE, THE CIT (A) HAS RECORDED A FINDING OF FACT THAT WARRANTS WERE IN TH E NAME OF THE ASSESSEE. HENCE, IF SEARCH AND SEIZURE OPERATI ON WAS CONDUCTED IN PURSUANCE OF SUCH WARRANT, NOTICES U/S 153A OF THE ACT HAD TO BE MANDATORILY ISSUED TO THE ASSESSE E. IF THAT IS THE CONCLUSION OF THE CIT(A), THEN THE VERY EDIF ICE OF THE ASSESSMENT ORDER U/S 153C OF THE ACT WOULD COLLAPSE , BECAUSE ITA NOS.337 TO 343/VIZAG/2014 A. AMMAJI, VSKP 5 ONCE THE WARRANT IS IN THE NAME OF THE ASSESSEE, TH EN IT IS TO BE PRESUMED THAT SEARCH AND SEIZURE OPERATION U/S 1 32 OF THE ACT WAS INITIATED IN CASE OF THE ASSESSEE AND AS A NATURAL COROLLARY, ASSESSING OFFICER SHOULD HAVE PROCEEDED U/S 153A OF THE ACT AND NOT 153C OF THE ACT AS HAS BEEN DONE IN THE PRESENT CASE. HENCE, IN THIS PREMISES ALONE, THE A SSESSMENT ORDER PASSED U/S 153C OF THE ACT CANNOT SURVIVE. B E THAT AS IT MAY, IT IS VERY MUCH CLEAR FROM THE ASSESSMENT ORDE R THAT THE ASSESSING OFFICER HAS PROCEEDED U/S 153C OF THE ACT PRIMARILY RELYING UPON TWO SEIZED MATERIALS I.E. THE REGISTER ED SALE DEED COPY DATED 14.11.2007 AND THE COMPUTATION OF INCOME IN THE HAND WRITING OF SRI GADIRAJU RAMAKRISHNAM RAJU. SO FAR AS REGISTERED SALE DEED IS CONCERNED, IT CANNOT BE CON SIDERED TO BE AN INCRIMINATING MATERIAL BELONGING TO THE ASSES SEE. SIMILARLY, THE COMPUTATION OF INCOME IN THE HAND WR ITING OF SRI GADIRAJU RAMAKRISHNAM RAJU ALSO CANNOT BE CONSIDERE D INCRIMINATING MATERIAL OR A DOCUMENT BELONGING TO T HE ASSESSEE. ON THE OTHER HAND, IT SHOWS A CLEAR INTE NTION OF THE ASSESSEE TO FILE HIS RETURN OF INCOME FOR WHICH TIM E IS AVAILABLE U/S 139(4) OF THE ACT AS ON DATE OF SEARC H. NO OTHER MATERIAL WHATSOEVER WAS RECOVERED. IN THAT VIEW OF THE MATTER, THE CONDITION PRECEDENT FOR INITIATION OF P ROCEEDING U/S 153C OF THE ACT IS NOT SATISFIED. FOR SUCH CON CLUSION, WE DRAW SUPPORT FROM THE ORDER PASSED BY THE COORDINAT E BENCH IN THE CASE OF CIT VS. SRI RAMA EDUCATIONAL TRUST ( SUPRA), WHEREIN THE COORDINATE BENCH HELD AS UNDER: 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS OF THE CASE AS WELL AS THE ORDERS OF THE AUT HORITIES BELOW. WE HAVE ALSO EXAMINED THE DECISIONS RELIED UPON BY THE PARTIES. ADMITTEDLY, IN THE PRESENT CASE, THE AO HAS INITIATED PROCEEDINGS UNDER SECTION 153C OF THE ACT . THEREFORE, IT IS CLEAR THAT THERE IS NO SEARCH ACTI ON IN THE CASE OF THE ASSESSEE. SECTION 153 C OF THE ACT READS AS UNDER: 153C(1) NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 139, SECTION 147, SECTION 148, SECTION 149, SECTION 151, AND SECTION 153, WHERE THE AO IS SATIS FIED 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 PERS ON REFERRED TO IN SECTION 153A, THEN THE BOOKS OF ACCO UNT OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED SHAL L BE HANDED OVER TO THE AO HAVING JURISDICTION OVER SUCH OTHER PERSON AND THAT AO SHALL PROCEED AGAINST EACH SUCH OTHER PERSON AND ISSUE SUCH OTHER PERSON NOTIC E AND ASSESS OR REASSESS INCOME OF SUCH OTHER PERSON IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A 10. A PLAIN READING OF THE AFORESAID PROVISION MAKE S IT CLEAR THAT TWO CONDITIONS HAVE TO BE SATISFIED FOR INITIAT ING ITA NOS.337 TO 343/VIZAG/2014 A. AMMAJI, VSKP 6 PROCEEDINGS UNDER SECTION 153C OF THE ACT. FIRSTLY , THE AO MUST BE SATISFIED THAT THE MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS S EIZED OR REQUISITIONED BELONGS OR BELONG TO A PERSON OTHER T HAN THE PERSON REFERRED TO IN SECTION 153A. SECONDLY, AFTE R BEING SATISFIED THAT IT BELONGS TO A PERSON OTHER THAN TH E PERSONS TO WHOM SEIZED, HE SHALL HANDOVER THE SEIZED MATERIAL T O THE AO HAVING JURISDICTION OVER SUCH OTHER PERSON AND THAT AO SHALL PROCEED AGAINST SUCH OTHER PERSON BY ISSUING NOTICE FOR ASSESSING OR REASSESSING FOR SUCH MATERIAL. THUS, THE PRIMARY CONDITION FOR ASSUMPTION OF JURISDICTION UNDER SECT ION 153C OF THE ACT IS THE SEIZED MATERIALS MUST BELONG TO THE PERSON AGAINST WHOM PROCEEDINGS UNDER SECTION 153C IS SOUGH T TO BE INITIATED. AS WOULD BE EVIDENT FROM THE ASSESSMENT ORDER, THE AO HAS REFERRED TO PAGES 31, 32 & 61 OF THE SEIZED DOCUMENT WITH IDENTIFICATION MARK TH/HNR/2. ON GOING THROUGH THE SAID SEIZED MATERIALS, COPIES OF WHICH ARE PLACED BEFORE US, IT IS TO BE NOTED THAT THE SEIZED MATERIALS AT PAGE 31 IS A REC EIPT OF M/S. HNR CONSTRUCTIONS ACKNOWLEDGING THE RECEIPT OF RS.1, 50,000/- FROM ONE SHRI K. BANGARRAJU . SIMILARLY, PAGE 32 I S ALSO RELATING TO HNR CONSTRUCTIONS MENTIONING CERTAIN DISBURSEMEN T SCHEDULE GIVEN BY SHRI R.KRISHNA MOHAN, LICENSED EN GINEER TOTALING TO RS.20 LAKHS. PAGE 61 ALSO MENTIONS CER TAIN FIGURES IN HANDWRITING. IN NONE OF THE DOCUMENTS, THERE IS ANY REFERENCE TO THE ASSESSEE. THEREFORE, IT CANNOT BE SAID THAT THESE DOCUMENTS BELONG TO THE ASSESSEE. IN THE REMAND RE PORT, SUBMITTED BEFORE THE CIT(A), IN THE COURSE OF APPEA L PROCEEDINGS, THE AO HOWEVER HAS TAKEN A DIFFERENT ST AND BY STATING THAT THE INITIATION OF PROCEEDINGS UNDER SE CTION 153C AS PER THE NOTING IN THE APPRAISAL REPORT IS ON THE BA SIS OF PAGE 64 OF THE SEIZED DOCUMENT WHICH IS A LETTER DATED 10.1 2.2004. PERUSAL OF THE SAID LETTER, COPY OF WHICH IS PLACED IN THE PB, WOULD REVEAL THAT IT IS NOTHING BUT A CERTIFICATE IS SUED BY THE CHAIRMAN OF THE MANAGING TRUSTEE OF THE ASSESSEE TR UST CERTIFYING THE WORKS ENTRUSTED TO H.N.R. CONSTRUCTIO NS. THEREFORE, ON PERUSAL OF THE AFORESAID DOCUMENTS, I T WOULD CLEARLY REVEAL THAT THE DOCUMENTS CONSIDERED BY TH E AO FOR INITIATION OF PROCEEDINGS U/S.153C DO NOT BELONG TO THE ASSESSEE. IN THE AFORESAID CIRCUMSTANCES, IN OUR V IEW PROCEEDINGS UNDER SECTION 153C OF THE ACT COULD NOT HAVE BEEN INITIATED BY THE AO ONLY ON THE BASIS OF SO CALLED SEIZED DOCUMENTS AS REFERRED TO BY HIM WHICH, IN OUR VIEW, DO NOT BELONG TO THE ASSESSEE. AT THIS STAGE, IT WOULD BE WORTHWHILE TO LOOK INTO THE FINDING OF FACTS RECORDED BY THE CIT( A) IN THIS REGARD, WHICH IS EXTRACTED HEREUNDER: 6. I HAVE CONSIDERED THESE ARGUMENTS AND ALS O PERUSED THE DOCUMENTS ON THE BASIS OF WHICH SATISFACTION IS SAID TO BE ARRIVED AT BY AO. PAGE NO.31 OF TH/HNR/2 IS A RECEIPT OF HNR CONSTRUCTIONS WHICH REFLECTS RECEIPT OF RS.1,50,0 00/- FROM SRI ITA NOS.337 TO 343/VIZAG/2014 A. AMMAJI, VSKP 7 K.BANGRAJU VIDE A CHEQUE TOWARDS PLOT ADVANCE. PAGE NO.32 ALSO BELONGS TO HNR CONSTRUCTIONS WHICH SHOWS THE DISBUR SEMENT SCHEDULE GIVEN BY LICENSED ENGINEER SRI K.KRISHNA PRASAD. THIS PERTAINS TO HNR CONSTRUCTIONS AND IT ALSO HAS NOTHI NG TO DO WITH THE ASSESSEE. THE ENTIRE PAYMENT SHOWN ON THE PAPE R TOTAL-UP TO AROUND RS.10 TO RS.12 LAKHS AND THERE IS NOTHING IN THIS PAPER TO SHOW THAT THIS BELONGS TO THE ASSESSEE TRUST OR HAS ANY CONNECTION WITH IT. PAGE 61 CONTAINS CERTAIN CALC ULATIONS WHICH DO NOT SUGGEST THAT IT HAS ANYTHING TO DO WITH ASSE SSEE TRUST. PAGE NO. 64 IS NO DOUBT A LETTER SIGNED BY THE CHAI RMAN AND MANAGING TRUSTEE OF SRI RAMA EDUCATIONAL TRUST. THE LETTER IS A CERTIFICATE ISSUED TO WHOM-SO-EVER IT MAY CONCERN, CERTIFYING THAT CERTAIN WORKS OF CONSTRUCTION ARE ENTRUSTED TO M/S.HNR CONSTRUCTION, A PROPRIETORSHIP CONCERN OF SRI TANGI HARI NARAYANA. THIS THOUGH IS ON ASSESSEE'S LETTER HEA D IS A GENERAL CERTIFICATE WHICH IS ISSUED TO HNR CONSTRUCTION AND THERE IS NOTHING EITHER INCRIMINATING IN THIS DOCUMENT SUGGESTING ANY UNACCOUNTED TRANSACTIONS. THIS CERTIFICATE ONLY SAYS WHAT IS ALREADY DECLARED IN THE BOOKS OF ACCOUNTS OF ASS ESSEE. IN MY OPINION IF 153C PROCEEDINGS CAN BE INITIATED BASED ON SUCH GENERAL LETTERS THAT WOULD BE STRETCHING THE LAW A BIT TOO FAR. IF THAT IS THE INTENTION OF THE LAW-MAKERS THEN 153C PROCEEDINGS CAN BE INITIATED AGAINST ALL ASSESSES WHOSE LETTER HEADS/VISITING CARDS ARE FOUND DURING THE SEARCH. TO ILLUSTRATE TH E MATTER, IF SOME PERSON IS SEARCHED AND DURING THE SEARCH PROCE EDINGS, IF BANK STATEMENTS, LIC POLICY CERTIFICATES OR SHARE C ERTIFICATES ETC ARE FOUND, IT DOES NOT MEAN THAT 153C PROCEEDINGS C AN BE INITIATED 'AGAINST THOSE BANKS/LIC/ COMPANIES TO WH ICH THE SHARES BELONG. SIMILARLY FROM ANY PERSON SEARCHED MANY PURCHASE BILLS WOULD BE FOUND. ALL THOSE BILLS WIL L BE ON LETTER HEADS OF THOSE CONCERNS AND WOULD BE SIGNED AND STA MPED. THIS WOULD NOT ENTAIL THE AO TO PROCEED AGAINST ALL SUCH CONCERNS U/S.153C, SIMPLY BECAUSE THESE ARE ALSO THE DOCUMEN TS ON THE LETTER HEAD OF THOSE CONCERNS AND ARE SIGNED BY THE PERSONS THEREIN. THIS IN MY OPINION WOULD BE RIDICULOUS INTERPRETATION OF THE WORD 'ANY DOCUMENTS' AS FOUND IN SEC. 153C. THIS DEFINITELY DOES NOT SEEM TO BE THE INTENTION OF THE LAW-MAKERS IN DRAFTING THE SAID SECTION. 11. AS CAN BE SEEN FROM THE AFORESAID EXTRACTED POR TION OF THE ORDER OF THE CIT(A), THE CIT(A) AFTER EXAMINING THE SEIZED MATERIAL HAS GIVEN A CATEGORICAL FINDING THAT THE S O CALLED SEIZED MATERIALS BY NO STRETCH OF IMAGINATION COULD BE SAID TO BE BELONGING TO THE ASSESSEE. THIS FACTUAL FINDING OF THE CIT(A) REMAINS UNCONTROVERTED. IN THE AFORESAID FA CTUAL BACKGROUND, WE WILL NOW EXAMINE THE RATIO LAID DOWN IN VARIOUS DECISIONS OF HIGH COURTS AND DIFFERENT BENC HES OF THE TRIBUNAL. ITA NOS.337 TO 343/VIZAG/2014 A. AMMAJI, VSKP 8 12. IN THE CASE OF VIJAYBHAI N CHANDRANI (SUPRA), T HE HONBLE GUJARAT HIGH COURT HELD AS UNDER: 12. ON A PLAIN READING OF THE AFORESAID PROVISIONS IT IS APPARENT THAT SS. 153A, 153B AND 153C LAY DOWN A SCHEME FOR ASSESSMENT IN CASE OF SEARCH AND REQUISI TION. SEC. 153A DEALS WITH PROCEDURE FOR ISSUANCE OF NOTICE AND ASSESSMENT OR REASSESSMENT IN CASE OF THE PERSON WH ERE A SEARCH IS INITIATED UNDER S. 132 OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ASSETS ARE REQUIS ITIONED UNDER S. 132A AFTER THE 31ST DAY OF MAY, 2003. SEC. 153B LAYS DOWN THE TIME- LIMIT FOR COMPLETION OF ASSESSME NT UNDER S. 153A. SEC. 153C WHICH IS SIMILARLY WORDED T O S. 158BD OF THE ACT, PROVIDES THAT WHERE THE AO IS SATISFIED THAT ANY MONEY, BULLION, JEWELLERY _OR OT HER 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 S. 15 3A HE SHALL PROCEED AGAINST 'EACH SUCH OTHER PERSON AND ISSUE SUCH OTHER PERSON NOTICE AND ASSESS OR REASSESS INC OME OF SUCH OTHER PERSON. HOWEVER, THERE IS A DISTINCTION BETWEEN THE TWO PROVISIONS IN AS MUCH AS UNDER S. 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 REQUISITION ED BELONG TO SUCH OTHER PERSON, WHEREAS UNDER S. 158BD IF THE AO IS SATISFIED THAT ANY UNDISCLOSED INCOME BEL ONGS TO ANY PERSON, OTHER THAN THE PERSON WITH RESPECT TO WHOM SEARCH WAS MADE UNDER S. 132 OR WHOSE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR ASSETS WERE REQUISITIONED UNDER S. 132A, HE SHALL PROCEED AGAINST SUCH OTHER PERSON UNDER S. 158BC. 13. THUS A CONDITION PRECEDENT FOR ISSUING NOTICE U NDER S. 153C AND ASSESSING OR REASSESSING I NCOME 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, RESORT CANNOT BE HAD TO THE PROVISIONS OF S. 153C OF THE ACT. 14. EXAMINING THE FACTS OF THE PRESENT CASE IN THE LIGHT OF THE AFORESAID STATUTORY SCHEME, IT IS AN ADMITTE D POSITION AS EMERGING FROM THE RECORD OF THE CASE, T HAT THE DOCUMENTS IN QUESTION, NAMELY THE THREE LOOSE PAPERS RECOVERED DURING THE SEARCH PROCEEDINGS DO N OT BELONG TO THE PETITIONER. IT MAY BE THAT THERE IS A REFERENCE TO THE PETITIONER IN AS MUCH AS HIS NAME IS REFLECTED IN THE LIST UNDER THE HEADING 'SAMUTKARSH ITA NOS.337 TO 343/VIZAG/2014 A. AMMAJI, VSKP 9 MEMBERS DETAILS' AND CERTAIN DETAILS ARE GIVEN UNDER DIFFERENT COLUMNS AGAINST THE NAME OF THE PETITIONE R ALONG WITH OTHER MEMBERS, HOWEVER, IT IS NOBODY'S C ASE THAT THE SAID DOCUMENTS BELONG TO THE PETITIONER. I T IS NOT EVEN THE CASE OF 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 S. 153C OF THE ACT STANDS VITIATED. 13. THE ITAT HYDERABAD BENCHES IN THE CASE OF M/S. SHOURI CONSTRUCTION (SUPRA), FOLLOWING THE AFORESAI D DECISION OF HONBLE GUJARAT HIGH COURT HELD THAT UN LESS THERE IS MATERIAL BELONG TO THE ASSESSEE, INITIATIO N OF PROCEEDINGS UNDER SECTION 153C IS INVALID. 14. IN THE CASE OF DCIT VS. ASP SOFTWARE SOLUTIONS (SUPRA), THE ITAT HYDERABAD, WHERE BOTH THE MEMBERS ARE PARTIES, IN PARA 29 OF THE ORDER EXPRESSED THE VIEW THAT IF THE SEIZED DOCUMENTS DO NOT ESTABLISH ANY INCRIMINA TING EVIDENCE OF UNDISCLOSED INCOME, PROVISIONS OF SECTI ON 153C CANNOT BE INVOKED. 15. THE OTHER DECISIONS RELIED UPON BY LD A.R. ALSO SUPPORT THE ABOVE VIEW. THEREFORE, CONSIDERING THE FACTS O F THE ASSESSEES CASE IN THE LIGHT OF RATIO LAID DOWN IN THE AFORESAID DECISIONS, IT BECOMES CLEAR THAT THE SEIZ ED MATERIALS DO NOT BELONG TO THE ASSESSEE. THAT BESI DES, THERE ARE NO INCRIMINATING MATERIALS INDICATING ANY UNDIS CLOSED INCOME OF THE ASSESSEE, WHICH COULD HAVE ENABLED TH E AO TO INVOKE THE PROVISIONS OF SECTION 153C OF THE ACT. THIS BECOMES FURTHER CLEAR FROM THE FACT THAT THE INCOME WERE DETERMINED FOR THE ASSESSMENT YEARS 2001-02, 2002-0 3 & 2003-04 ONLY ON THE GROUND THAT THE ASSESSEE HAS NO T BEEN APPROVED UNDER SECTION 10(23C) OF THE ACT. THE DETERMINATION OF INCOME HAS ABSOLUTELY NO RELATION OR RELEVANCE TO THE SEIZED MATERIALS. SO FAR AS THE A SSESSMENT YEARS 2004-05 AND 2005-06 ARE CONCERNED, PERUSAL OF THE ASSESSMENT ORDERS PASSED IN THOSE YEARS WOULD REVEAL THE FACT THAT THE DETERMINATION OF INCOME IS ON THE BAS IS OF THE IMPOUNDED MATERIALS AS A RESULT OF SURVEY AND NOT O N THE BASIS OF ANY SEIZED MATERIALS BELONGING TO THE ASSE SSEE. IN THE AFORESAID CIRCUMSTANCES, THE PRE CONDITIONS FOR ASSUMING JURISDICTION UNDER SECTION 153C ARE NOT SA TISFIED. SO FAR AS THE DECISIONS RELIED UPON BY LD D.R. IN S UPPORT OF HIS CONTENTION, AFTER CAREFULLY APPLYING OUR MIND T O THE RATIO LAID DOWN THEREIN, WE OBSERVE THAT THE DECISIONS AR E DISTINGUISHABLE ON FACTS AND DO NOT APPLY TO THE FA CTS OF THE ASSESSEES CASE. IN THAT VIEW OF THE MATTER, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN HOLDING THE ITA NOS.337 TO 343/VIZAG/2014 A. AMMAJI, VSKP 10 INITIATION OF PROCEEDINGS UNDER SECTION 153C TO BE AB INITIO VOID AND CONSEQUENTLY ANNULLING THE ASSESSMENTS FOR ALL THE AFORESAID ASSESSMENT YEARS. ACCORDINGLY, WE UPHOLD THE SAME BY DISMISSING THE GROUNDS TAKEN BY THE DEPARTM ENT. 10. THE ITAT DELHI BENCH IN CASE OF V.K. FISCAL SER VICES PVT. LTD. VS. DCIT IN ITA NOS.5460 TO 5465/DEL/2012 ON A CONSPECTUS OF DECISIONS OF DIFFERENT HIGH COURTS AS WELL AS DI FFERENT BENCHES OF ITAT ALSO EXPRESSED THE VIEW THAT IN ABSENCE OF INCRIMINATING MATERIAL BELONGING TO ASSESSEE, PROCEEDING U/S 153C CANNOT BE INITIATED. HONBLE A.P. HIGH COURT IN A JUDGEMENT DATED 12.7.2003 IN ITA NO.266 OF 2013 IN CASE OF M/S. HYD ERABAD HOUSE PVT. LTD. UPHELD THE DECISION OF THE ITAT HYD ERABAD BENCH, WHEREIN IT IS HELD THAT COMPUTATION OF UNDIS CLOSED INCOME U/S 153A/153C OF THE ACT MUST BE IN REFERENCE TO TH E INCRIMINATING MATERIAL FOUND AS A RESULT OF SEARCH. 10. THE SAME VIEW WAS AGAIN REITERATED IN CASE OF S RI LALITHA CONSTRUCTIONS (SUPRA). THEREFORE, CONSIDERING THE FACT THAT THE ASSESSMENT MADE BY THE ASSESSING OFFICER IS ON THE BASIS OF THE ENTRIES MA DE IN THE BOOKS OF ACCOUNTS AND INCOME DISCLOSED IN THE RETURN OF INCOME MUCH P RIOR TO SEARCH AND WHICH HAS NO REFERENCE TO ANY INCRIMINATING MATERIAL FOUN D AS A RESULT OF SEARCH AND SEIZURE OPERATION, WE ARE OF THE VIEW THAT THE PROC EEDING INITIATED U/S 153C OF THE ACT IS INVALID IN LAW. THE MATTER CAN ALSO BE LOOKED INTO FROM ANOTHER ANGLE. AS RIGHTLY BEEN STATED BY THE LD. A.R., ON THE DATE NOTICE WAS ISSUED U/S 153C OF THE ACT, THERE IS NO ASSESSMENT PROCEED ING PENDING BEFORE THE ASSESSING OFFICER FOR THE AFORESAID ASSESSMENT YEAR . THEREFORE, IN ABSENCE OF ANY INCRIMINATING MATERIAL SHOWING CONCEALED/UNDISC LOSED INCOME OF THE ASSESSEE, THE ASSESSING OFFICER COULD NOT HAVE PROC EEDED TO ASSESS INCOME WHICH HAS ALREADY BEEN REFLECTED IN THE BOOKS OF AC COUNTS AND DISCLOSED IN THE RETURN OF INCOME FILED BY THE ASSESSEE. EVEN O THERWISE ALSO, CONCLUSION DRAWN BY THE ASSESSING OFFICER IN THE ASSESSMENT OR DER THAT THE AGRICULTURAL INCOME IS UNEXPLAINED ALSO FOUND TO BE NOT ON COGEN T MATERIAL, BECAUSE OF THE FACT THAT THE CIT(A) HAS ACCEPTED 50% OF THE IN COME SHOWN AS AGRICULTURAL INCOME AGAINST WHICH THE DEPARTMENT IS NOT IN APPEAL. FURTHER, IN THE REMAND REPORT, THE ASSESSING OFFICER HIMSELF HA S ACCEPTED THAT THE ASSESSEE HAS EARNED INCOME FROM COCONUT TREES AND C ASURINA PLANTATION WHICH CAN BE CONSIDERED AS AGRICULTURAL INCOME. IN AFORESAID VIEW OF THE MATTER, THE PROCEEDING INITIATED U/S 153C OF THE AC T IN ABSENCE OF ANY INCRIMINATING MATERIAL AND ONLY ON THE BASIS OF THE MATERIAL ALREADY DISCLOSED BY THE ASSESSEE IS INVALID AND CONSEQUENTLY THE ASS ESSMENT ORDERS PASSED ARE ALSO UNSUSTAINABLE IN LAW. ACCORDINGLY, WE QUASH A SSESSMENT ORDERS PASSED IN ALL THESE ASSESSMENT YEARS. 6. THE FACTS AND ISSUES IN THE PRESENT APPEAL ARE I DENTICAL TO THE FACTS DEALT BY THE COORDINATE BENCH IN THE DECISION REFER RED TO HEREIN ABOVE. IN THIS CASE ALSO ASSESSMENT MADE BY THE AO IS NOT WIT H REFERENCE TO ANY INCRIMINATING MATERIAL FOUND AS A RESULT OF SEARCH. THEREFORE, RESPECTFULLY ITA NOS.337 TO 343/VIZAG/2014 A. AMMAJI, VSKP 11 FOLLOWING THE AFORESAID DECISION OF THE COORDINATE BENCH, WE QUASH THE ASSESSMENT ORDER PASSED FOR ALL THESE ASSESSMENT YE ARS. 7. AS WE HAVE QUASHED THE ASSESSMENTS ORDERS, THE O THER ISSUE RELATING TO MERITS OF THE ADDITION IS MERELY OF ACADEMIC INT EREST, HENCE, NOT REQUIRED TO BE ADJUDICATED. 8. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLOWED. ITA NO.343/VIZAG/2014: 9. AS ALREADY STATED HEREIN BEFORE, THE ASSESSEE HA S DECLARED AGRICULTURAL INCOME FOR ALL THE ASSESSMENT YEARS. WHILE COMPLET ING ASSESSMENT U/S 143(3) OF THE ACT FOR THE IMPUGNED ASSESSMENT YEAR, THE ASSESSING OFFICER REJECTED ASSESSEES CLAIM OF AGRICULTURAL INCOME AN D TREATED IT AS UNEXPLAINED CREDIT U/S 68 OF THE ACT. THE CIT(A) ALLOWING PART IAL RELIEF MODIFIED THE ADDITION MADE BY THE ASSESSING OFFICER. WHILE CONS IDERING IDENTICAL NATURE OF DISPUTE IN CASE OF M/S. AVINASH ESTATES AND RESORTS LTD. VS. DCIT IN ITA NOS.299 TO 302/VIZAG/2014 AND OTHER GROUP COMPANIES , THIS BENCH HAS DIRECTED THE ASSESSING OFFICER TO DISALLOW 25% OUT OF THE AGRICULTURAL INCOME DECLARED BY THE ASSESSEE. RESPECTFULLY, FOLLOWING THE SAME, IN THE PRESENT CASE ALSO WE DIRECT THE AO TO DISALLOW 25% OUT OF T HE AGRICULTURAL INCOME DECLARED BY THE ASSESSEE. 10. IN THE RESULT, APPEALS OF THE ASSESSEE IN ITA N OS. 337 TO 342/VIZAG/2014 ARE ALLOWED AND ITA NO.343/VIZAG/2014 IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 21 ST JULY14 SD/- SD/- (J. SUDHAKAR REDDY) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM DATED 21 ST JULY, 2014 ITA NOS.337 TO 343/VIZAG/2014 A. AMMAJI, VSKP 12 COPY TO 1 M/S. A. AMMAJI, D.NO.11-8-34, DASAPALLA HILLS, VI SAKHAPATNAM. 2 THE CIT (CENTRAL), HYDERABAD 3 THE DCIT, CENTRAL CIRCLE-2, VISAKHAPATNAM 4 THE CIT(A), VISAKHPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM