Avnash Developers Pvt.Ltd., Visakhapatnam V. THE DCIT, Visakhapatnam

ITA 368/VIZ/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80161 (ITAT-VISAKHAPATNAM)
• 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; Share purchase agreement; Documents seized
• Section: 143(3); 153A; 68; 132

Judgement Text

ITA NOS.364 TO 368/VIZAG/2014 AVNASH DEVELOPERS PVT. LTD., 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.364 TO 368/VIZAG/2014 ASSESSMENT YEARS : 2004 - 05 TO 2008 - 0 9 RESPECTIVELY AVNASH DEVELOPERS PVT. LTD. VISAKHAPATNAM VS. DCIT CENTRAL CIRCLE-2 VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.AAECA 9150E ASSESSEE BY: SHRI G.V.N. HARI, ADVOCATE REVENUE BY: SHRI K.V.N. CHARYA, CIT(DR) DATE OF HEARING : 04.07.2014 DATE OF PRONOUNCEMENT : 21.07.2014 ORDER PER BENCH:- THESE ARE BUNCH OF FIVE APPEALS BY THE ASSESSEE AG AINST A COMMON ORDER DATED 26.03.2014 OF THE CIT(A), VISAKHAPATNAM PERTAINING TO THE ASSESSMENT YEARS 2004-05 TO 2008-09. ITA NOS.364 TO 367/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.364/VIZAG/2014. THE FIRST ISSUE IS REGAR DING VALIDITY OF PROCEEDING U/S 153C OF THE ACT. 3. BRIEFLY THE FACTS ARE THE ASSESSEE THE ASSESSEE IS ENGAGED IN REAL ESTATE BUSINESS. IT HAS FILED ITS RETURN IN REGULAR COURSE ON 28/10/2004 DECLARING NIL INCOME AND AGRICULTURAL INCOME OF RS . 1,78,000/-. AS A RESULT OF SEARCH AND SEIZURE OPERATION CONDUCTED IN CASE O F SRI A.T. RAYUDU ON 4.12.2007, THE ASSESSING OFFICER INITIATED PROCEEDI NG U/S 153C OF THE INCOME- TAX ACT ON 15.12.2008 CALLING UPON THE ASSESSEE TO SUBMIT HIS RETURN OF INCOME. THE ASSESSING OFFICER COMPLETED THE ASSESS MENT U/S 153C OF THE ACT ITA NOS.364 TO 368/VIZAG/2014 AVNASH DEVELOPERS PVT. LTD., VSKP 2 BY DISALLOWING THE AGRICULTURAL INCOME DECLARED BY THE ASSESSEE IN THE ORIGINAL RETURN OF INCOME FILED BY HIM TREATING IT AS UNEXPL AINED CREDIT. THE ASSESSEE CHALLENGED THE ADDITION MADE IN APPEAL PREFERRED BE FORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE CHALLENGED THE VALIDITY OF THE PROCEEDING INITIATED U/S 153C OF THE ACT AS WELL AS THE MERITS OF THE AD DITIONS MADE BY THE ASSESSING OFFICER. THE CIT(A) WHILE UPHOLDING THE VALIDITY OF PROCEEDING U/S 153C OF THE ACT ALLOWED 50% OF THE INCOME DECLARED AS AGRICULTURAL INCOME. IN OTHER WORDS, THE CIT(A) SUSTAINED 50% OF THE ADDI TION MADE BY THE ASSESSING OFFICER AS UNEXPLAINED CREDIT. STILL BEIN G AGGRIEVED OF THE ORDER OF THE CIT(A), THE ASSESSEE HAS PREFERRED THE PRESENT APPEAL. 4. 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 ANOTHER GROUP COMPANY VIZ. M/S. AV INASH ESTATES & RESORTS LTD. IN ITA NOS.299 TO 302/VIZAG/2014 DATED 4.7.201 4, 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 OF SEARCH AND SEIZURE OPERATION CONDUCTED IN CASE OF A N ASSESSEE IF MONEY, BULLION, JEWELLERY, BOOKS OF ACCOUNTS AND OT HER DOCUMENTS PERTAINING TO ANOTHER PERSON IS FOUND AND SEIZED, T HEN PROCEEDING U/S 153C OF THE ACT CAN BE INITIATED BY THE ASSESSING O FFICER AFTER RECORDING SATISFACTION. THEREFORE, THE MONEY, BULLION, JEWEL LERY, VALUABLE ARTICLE, THINGS, BOOKS OF ACCOUNTS OTHER DOCUMENTS REFERRED TO IN SECTION 153C OF THE ACT WOULD MEAN THAT THOSE ARTICLES OR THINGS ARE IN NATURE OF INCRIMINATING MATERIAL AND INDICATE CONCEALED/SUPPR ESSED INCOME OF THE ASSESSEE. ON A PERUSAL OF THE ASSESSMENT ORDER , IT IS NOT FORTHCOMING, WHAT ARE THE SEIZED MATERIALS ON THE B ASIS OF WHICH THE ASSESSING OFFICER HAS INITIATED PROCEEDINGS U/S 153 C OF THE ACT. HOWEVER, A REFERENCE TO THE ORDER PASSED BY LD. CIT (A) WOULD REVEAL THAT THE SO CALLED INCRIMINATING MATERIALS FOUND AN D 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.364 TO 368/VIZAG/2014 AVNASH DEVELOPERS PVT. LTD., 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 V OUCHERS. 8. A REFERENCE TO THE ASSESSMENT ORDER IN THE CONTE XT 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 H AS BEEN INITIATED U/S 153C OF THE ACT. FURTHER, NOWHERE IN THE ASSES SMENT ORDER THE ASSESSING OFFICER HAS REFERRED TO THESE SEIZED MATE RIALS TO SAY THAT AS A RESULT OF SUCH SEIZED MATERIALS, UNDISCLOSED INCOME OF THE ASSESSEE HAS BEEN UNEARTHED. IN THE AFORESAID FACTS, THE SO CAL LED SEIZED MATERIALS CANNOT BE CONSIDERED TO BE INCRIMINATING MATERIALS SO AS TO EMPOWER THE ASSESSING OFFICER TO INITIATE PROCEEDINGS U/S 1 53C OF THE ACT. SECTION 153C OF THE ACT CANNOT BE INTERPRETED IN A MANNER TO CONTEMPLATE THAT ANY MATERIAL WHICH HAS A REFERENCE TO THE ASSESSEE, WHETHER IT IS INCRIMINATING OR NOT CAN BE USED AS A TOOL TO LAUNCH A PROCEEDING U/S 153C OF THE ACT. IF SECTION 153C OF THE ACT IS TO BE INTERPRETED IN SUCH A NARROW MANNER THEN ANY INNOCU OUS MATERIAL FOUND DURING A SEARCH OF THIRD PARTY AND HAS ANY RE FERENCE TO THE ASSESSEE THEN IT WILL LEAD TO A PROCEEDING U/S 153C OF THE ACT. THAT CANNOT BE THE INTENTION OF LEGISLATURE. AS WOULD B E CLEAR FROM THE ASSESSMENT ORDER, THE INCOME WHICH THE ASSESSING OF FICER 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 REFLE CTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE MAINTAINED IN REGULAR COUR SE AS WELL AS DISCLOSED IN THE RETURN OF INCOME FILED BY THE ASSE SSEE PRIOR TO THE SEARCH. ONLY ON THE BASIS OF SOME ENQUIRY CONDUCTE D AT THE TIME OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS F ORMED AN OPINION THAT THE AGRICULTURAL INCOME REFLECTED IN THE BOOKS OF ACCOUNTS AND DISCLOSED IN THE RETURN OF INCOME IS UNEXPLAINED. IT IS PATENT AND OBVIOUS FROM THE ASSESSMENT ORDER THAT AO HAS ACCEP TED THE INCOME DECLARED BY THE ASSESSEE ORIGINALLY EXCEPT TINKERIN G 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 CIRCUMSTANCES, WE FAIL TO UNDERSTAND THE PURPOSE OF INITIATING PRO CEEDING U/S 153C OF THE ACT. EVEN IN RESPECT OF ADDITION MADE U/S 68 O F THE ACT ALSO THE AO SUBSEQUENTLY IN HIS REMAND REPORT HAS ACCEPTED T HAT 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 O F THE ASSESSING OFFICER TO INITIATE PROCEEDINGS U/S 153C OF THE ACT TO ASSE SS SUCH INCOME AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. THE ASS ESSING OFFICER CERTAINLY IS NOT EMPOWERED UNDER THE ACT TO CONSIDE R THE ISSUES IN A ITA NOS.364 TO 368/VIZAG/2014 AVNASH DEVELOPERS PVT. LTD., VSKP 4 SEARCH ASSESSMENT, WHICH CAN BE CONSIDERED IN REGUL AR ASSESSMENT. THE ITAT VIZAG BENCH IN CASE OF ACIT VS. SRI RAM ED UCATIONAL TRUST (SUPRA) WHILE CONSIDERING THE POWERS OF THE ASSESSI NG 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/20 13 DATED 5.3.2014 CONSIDERING IDENTICAL ISSUE ON PROCEEDING INITIATED U/S 153C OF THE ACT IN ABSENCE OF INCRIMINATING MATERIAL HEL D 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 APPLIED OUR MIND TO THE DECISIONS RELIED UPON BY THE PARTIE S. IT IS APPARENT FROM THE ASSESSMENT ORDER THAT THE ASSESSI NG OFFICER HAS PROCEEDED U/S 153C OF THE ACT. HOWEVER , WE MAY OBSERVE THAT WHILE DEALING WITH ASSESSEES GROU ND ON THIS ISSUE IN PARA-7 OF HIS ORDER EXTRACTED HEREIN ABOVE, THE CIT(A) HAS RECORDED A FINDING OF FACT THAT WARRANTS WERE IN THE NAME OF THE ASSESSEE. HENCE, IF SEARCH AND SEI ZURE OPERATION WAS CONDUCTED IN PURSUANCE OF SUCH WARRAN T, NOTICES U/S 153A OF THE ACT HAD TO BE MANDATORILY I SSUED TO THE ASSESSEE. IF THAT IS THE CONCLUSION OF THE CIT (A), THEN THE VERY EDIFICE OF THE ASSESSMENT ORDER U/S 153C O F THE ITA NOS.364 TO 368/VIZAG/2014 AVNASH DEVELOPERS PVT. LTD., VSKP 5 ACT WOULD COLLAPSE, BECAUSE ONCE THE WARRANT IS IN THE NAME OF THE ASSESSEE, THEN IT IS TO BE PRESUMED THA T SEARCH AND SEIZURE OPERATION U/S 132 OF THE ACT WAS INITIA TED IN CASE OF THE ASSESSEE AND AS A NATURAL COROLLARY, AS SESSING OFFICER SHOULD HAVE PROCEEDED U/S 153A OF THE ACT A ND NOT 153C OF THE ACT AS HAS BEEN DONE IN THE PRESENT CAS E. HENCE, IN THIS PREMISES ALONE, THE ASSESSMENT ORDER PASSED U/S 153C OF THE ACT CANNOT SURVIVE. BE THAT AS IT MAY, IT IS VERY MUCH CLEAR FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER HAS PROCEEDED U/S 153C OF THE ACT PRIMARILY RELYING UPON TWO SEIZED MATERIALS I.E. TH E REGISTERED SALE DEED COPY DATED 14.11.2007 AND THE COMPUTATION OF INCOME IN THE HAND WRITING OF SRI GA DIRAJU RAMAKRISHNAM RAJU. SO FAR AS REGISTERED SALE DEED IS CONCERNED, IT CANNOT BE CONSIDERED TO BE AN INCRIMI NATING MATERIAL BELONGING TO THE ASSESSEE. SIMILARLY, THE COMPUTATION OF INCOME IN THE HAND WRITING OF SRI GA DIRAJU RAMAKRISHNAM RAJU ALSO CANNOT BE CONSIDERED 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 TIME IS AVAILABLE U/S 139(4) OF THE ACT AS ON DATE OF SEARC H. NO OTHER MATERIAL WHATSOEVER WAS RECOVERED. IN THAT V IEW OF THE MATTER, THE CONDITION PRECEDENT FOR INITIATION OF PROCEEDING U/S 153C OF THE ACT IS NOT SATISFIED. F OR SUCH CONCLUSION, WE DRAW SUPPORT FROM THE ORDER PASSED B Y THE COORDINATE BENCH IN THE CASE OF CIT VS. SRI RAMA EDUCATIONAL TRUST (SUPRA), WHEREIN THE COORDINATE B ENCH HELD AS UNDER: 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS OF THE CASE AS WELL AS THE ORDERS OF TH E AUTHORITIES BELOW. WE HAVE ALSO EXAMINED THE DECIS IONS RELIED UPON BY THE PARTIES. ADMITTEDLY, IN THE PRE SENT CASE, THE AO HAS INITIATED PROCEEDINGS UNDER SECTIO N 153C OF THE ACT. THEREFORE, IT IS CLEAR THAT THERE IS N O SEARCH ACTION 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 SATISFIED THAT ANY MONEY, BULLION, JEWELLERY OR OTHE R VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS SEIZED OR REQUISITIONED BELONGS OR BELONG TO A PERSON REFERRED TO IN SECTION 153A, THE N THE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED SHALL 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 NOTICE AND ASSESS OR ITA NOS.364 TO 368/VIZAG/2014 AVNASH DEVELOPERS PVT. LTD., VSKP 6 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 INITIATING 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 DO CUMENTS SEIZED OR REQUISITIONED BELONGS OR BELONG TO A PERS ON OTHER THAN THE PERSON REFERRED TO IN SECTION 153A. SECON DLY, AFTER BEING SATISFIED THAT IT BELONGS TO A PERSON OTHER T HAN THE PERSONS TO WHOM SEIZED, HE SHALL HANDOVER THE SEIZED MATERIAL TO THE AO HAVING JURISDICTION OVER SUCH OT HER PERSON AND THAT AO SHALL PROCEED AGAINST SUCH OTHER PERSON BY ISSUING NOTICE FOR ASSESSING OR REASSESSING FOR SUC H MATERIAL. THUS, THE PRIMARY CONDITION FOR ASSUMPTION OF JURIS DICTION UNDER SECTION 153C OF THE ACT IS THE SEIZED MATERIA LS MUST BELONG TO THE PERSON AGAINST WHOM PROCEEDINGS UNDER SECTION 153C IS SOUGHT TO BE INITIATED. AS WOULD B E EVIDENT FROM THE ASSESSMENT ORDER, THE AO HAS REFERRED TO P AGES 31, 32 & 61 OF THE SEIZED DOCUMENT WITH IDENTIFICATION MARK TH/HNR/2. ON GOING THROUGH THE SAID SEIZED MATERIA LS, COPIES OF WHICH ARE PLACED BEFORE US, IT IS TO BE N OTED THAT THE SEIZED MATERIALS AT PAGE 31 IS A RECEIPT OF M/S . HNR CONSTRUCTIONS ACKNOWLEDGING THE RECEIPT OF RS.1,50,0 00/- FROM ONE SHRI K. BANGARRAJU . SIMILARLY, PAGE 32 I S ALSO RELATING TO HNR CONSTRUCTIONS MENTIONING CERTAIN DISBURSEMENT SCHEDULE GIVEN BY SHRI R.KRISHNA MOHAN , LICENSED ENGINEER TOTALING TO RS.20 LAKHS. PAGE 61 ALSO MENTIONS CERTAIN FIGURES IN HANDWRITING. IN NONE OF THE DOCUMENTS, THERE IS ANY REFERENCE TO THE ASSESSEE. THEREFORE, IT CANNOT BE SAID THAT THESE DOCUMENTS B ELONG TO THE ASSESSEE. IN THE REMAND REPORT, SUBMITTED BEFO RE THE CIT(A), IN THE COURSE OF APPEAL PROCEEDINGS, THE AO HOWEVER HAS TAKEN A DIFFERENT STAND BY STATING THAT THE INI TIATION OF PROCEEDINGS UNDER SECTION 153C AS PER THE NOTING IN THE APPRAISAL REPORT IS ON THE BASIS OF PAGE 64 OF THE SEIZED DOCUMENT WHICH IS A LETTER DATED 10.12.2004. PERUSA L OF THE SAID LETTER, COPY OF WHICH IS PLACED IN THE PB, WOUL D REVEAL THAT IT IS NOTHING BUT A CERTIFICATE ISSUED BY THE CHAIRMAN OF THE MANAGING TRUSTEE OF THE ASSESSEE TRUST CERTIFYI NG THE WORKS ENTRUSTED TO H.N.R. CONSTRUCTIONS. THEREFORE, ON PERUSAL OF THE AFORESAID DOCUMENTS, IT WOULD CLEARLY REVEAL THAT THE DOCUMENTS CONSIDERED BY THE AO FOR INITIA TION OF PROCEEDINGS U/S.153C DO NOT BELONG TO THE ASSESSEE. IN THE AFORESAID CIRCUMSTANCES, IN OUR VIEW PROCEEDINGS UN DER SECTION 153C OF THE ACT COULD NOT HAVE BEEN INITIAT ED 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 ITA NOS.364 TO 368/VIZAG/2014 AVNASH DEVELOPERS PVT. LTD., VSKP 7 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 RECEI PT OF RS.1,50,000/- FROM SRI K.BANGRAJU VIDE A CHEQUE TO WARDS PLOT ADVANCE. PAGE NO.32 ALSO BELONGS TO HNR CONSTRUCTIONS WHICH SHOWS THE DISBURSEMENT 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 PAPER TOTAL-UP TO AROUND RS.10 TO RS.12 LAKHS AND T HERE IS NOTHING IN THIS PAPER TO SHOW THAT THIS BELONGS TO THE ASSESSEE TRUST OR HAS ANY CONNECTION WITH IT. PAG E 61 CONTAINS CERTAIN CALCULATIONS WHICH DO NOT SUGGEST THAT IT HAS ANYTHING TO DO WITH ASSESSEE TRUST. PAGE NO. 6 4 IS NO DOUBT A LETTER SIGNED BY THE CHAIRMAN 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 E NTRUSTED TO M/S.HNR CONSTRUCTION, A PROPRIETORSHIP CONCERN OF SRI TANGI HARI NARAYANA. THIS THOUGH IS ON ASSESSEE'S LETTER HEAD IS A GENERAL CERTIFICATE WHICH IS ISSUED TO HN R CONSTRUCTION AND THERE IS NOTHING EITHER INCRIMINAT ING IN THIS DOCUMENT SUGGESTING ANY UNACCOUNTED TRANSACTIONS. THIS CERTIFICATE ONLY SAYS WHAT IS ALREADY DECLARED IN THE BOOKS OF ACCOUNTS OF ASSESSEE. IN M Y 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 W HOSE LETTER HEADS/VISITING CARDS ARE FOUND DURING THE SE ARCH. TO ILLUSTRATE THE MATTER, IF SOME PERSON IS SEARCHED A ND DURING THE SEARCH PROCEEDINGS, IF BANK STATEMENTS, LIC POL ICY CERTIFICATES OR SHARE CERTIFICATES ETC ARE FOUND, I T DOES NOT MEAN THAT 153C PROCEEDINGS CAN BE INITIATED 'AGAINS T THOSE BANKS/LIC/ COMPANIES TO WHICH THE SHARES BELONG. SIMILARLY FROM ANY PERSON SEARCHED MANY PURCHASE BI LLS WOULD BE FOUND. ALL THOSE BILLS WILL BE ON LETTER HEADS OF THOSE CONCERNS AND WOULD BE SIGNED AND STAMPED. THI S WOULD NOT ENTAIL THE AO TO PROCEED AGAINST ALL SUCH CONCERNS U/S.153C, SIMPLY BECAUSE THESE ARE ALSO T HE DOCUMENTS 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 DOCUM ENTS' AS FOUND IN SEC. 153C. THIS DEFINITELY DOES NOT SEE M TO BE THE INTENTION OF THE LAW-MAKERS IN DRAFTING THE SAID SECTION. ITA NOS.364 TO 368/VIZAG/2014 AVNASH DEVELOPERS PVT. LTD., VSKP 8 11. AS CAN BE SEEN FROM THE AFORESAID EXTRACTED PORTION OF THE ORDER OF THE CIT(A), THE CIT(A) AFTE R EXAMINING THE SEIZED MATERIAL HAS GIVEN A CATEGORIC AL FINDING THAT THE SO CALLED SEIZED MATERIALS BY NO S TRETCH OF IMAGINATION COULD BE SAID TO BE BELONGING TO THE AS SESSEE. THIS FACTUAL FINDING OF THE CIT(A) REMAINS UNCONTRO VERTED. IN THE AFORESAID FACTUAL BACKGROUND, WE WILL NOW EXAM INE THE RATIO LAID DOWN IN VARIOUS DECISIONS OF HIGH COU RTS AND DIFFERENT BENCHES OF THE TRIBUNAL. 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 REQUISITION. SEC. 153A DEALS WITH PROCEDURE FOR ISSUANCE OF NOTICE AND ASSESSMENT OR REASSESSMENT I N CASE OF THE PERSON WHERE A SEARCH IS INITIATED UNDER S. 132 OR BOOKS OF ACCOUNT, OTHER DOCUMENT S OR ASSETS ARE REQUISITIONED UNDER S. 132A AFTER THE 3 1ST DAY OF MAY, 2003. SEC. 153B LAYS DOWN THE TIME- LIMI T FOR COMPLETION OF ASSESSMENT UNDER S. 153A. SEC. 153C WHICH IS SIMILARLY WORDED TO S. 158BD OF THE AC T, PROVIDES THAT WHERE THE AO IS SATISFIED THAT ANY MONEY, BULLION, JEWELLERY _OR OTHER VALUABLE ARTICL E 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. 153A HE SHALL PRO CEED AGAINST 'EACH SUCH OTHER PERSON AND ISSUE SUCH OTH ER PERSON NOTICE AND ASSESS OR REASSESS INCOME 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 BELONGS 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, ITA NOS.364 TO 368/VIZAG/2014 AVNASH DEVELOPERS PVT. LTD., VSKP 9 RESORT CANNOT BE HAD TO THE PROVISIONS OF S. 153C O F 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 TH E 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 IN AS M UCH AS HIS NAME IS REFLECTED IN THE LIST UNDER THE HEADING 'SAMUTKARSH MEMBERS DETAILS' AND CERTAIN DETAILS AR E GIVEN UNDER DIFFERENT COLUMNS AGAINST THE NAME OF THE PETITIONER ALONG WITH OTHER MEMBERS, HOWEVER, I T IS NOBODY'S CASE THAT THE SAID DOCUMENTS BELONG TO THE PETITIONER. IT IS NOT EVEN THE CASE OF REVENUE THAT THE SAID THREE DOCUMENTS ARE IN THE HANDWRITIN G 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 OF THE ASSESSEES CASE IN THE LIGHT OF RATIO LAID D OWN 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 UNDISCLOSED INCOME OF THE ASSESSEE, WHICH COULD HAV E ENABLED THE 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, 2002-03 & 2003-04 ONLY ON THE GROUND THAT THE ASSESSEE HAS NOT BEEN APPROVED UNDER SECTION 10(23C ) OF THE ACT. THE DETERMINATION OF INCOME HAS ABSOLUTEL Y NO RELATION OR RELEVANCE TO THE SEIZED MATERIALS. SO FAR AS THE ASSESSMENT YEARS 2004-05 AND 2005-06 ARE CONCERNED, PERUSAL OF THE ASSESSMENT ORDERS PASSED IN THOSE YE ARS ITA NOS.364 TO 368/VIZAG/2014 AVNASH DEVELOPERS PVT. LTD., VSKP 10 WOULD REVEAL THE FACT THAT THE DETERMINATION OF INC OME IS ON THE BASIS OF THE IMPOUNDED MATERIALS AS A RESULT OF SURVEY AND NOT ON THE BASIS OF ANY SEIZED MATERIALS BELONGING TO THE ASSESSEE. IN THE AFORESAID CIRCUM STANCES, THE PRE CONDITIONS FOR ASSUMING JURISDICTION UNDER SECTION 153C ARE NOT SATISFIED. SO FAR AS THE DECISIONS RE LIED UPON BY LD D.R. IN SUPPORT OF HIS CONTENTION, AFTER CARE FULLY APPLYING OUR MIND TO THE RATIO LAID DOWN THEREIN, W E OBSERVE THAT THE DECISIONS ARE DISTINGUISHABLE ON F ACTS AND DO NOT APPLY TO THE FACTS OF THE ASSESSEES CASE. IN THAT VIEW OF THE MATTER, WE DO NOT FIND ANY INFIRMITY IN T HE ORDER OF THE CIT(A) IN HOLDING THE INITIATION OF PR OCEEDINGS UNDER SECTION 153C TO BE AB INITIO VOID AND CONSEQU ENTLY ANNULLING THE ASSESSMENTS FOR ALL THE AFORESAID ASS ESSMENT YEARS. ACCORDINGLY, WE UPHOLD THE SAME BY DISMISSI NG THE GROUNDS TAKEN BY THE DEPARTMENT. 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 DIFFERENT BENCHES OF ITAT ALSO EXPRESSED THE VIEW T HAT IN ABSENCE OF INCRIMINATING MATERIAL BELONGING TO ASSE SSEE, 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. HYDERABAD HOUSE PVT. LTD. UPHELD TH E DECISION OF THE ITAT HYDERABAD BENCH, WHEREIN IT IS HELD THAT COMPUTATION OF UNDISCLOSED INCOME U/S 153A/153 C OF THE ACT MUST BE IN REFERENCE TO THE INCRIMINATING M ATERIAL FOUND AS A RESULT OF SEARCH. 9. THE SAME VIEW WAS AGAIN REITERATED IN CASE OF SR I LALITHA CONSTRUCTIONS (SUPRA). THEREFORE, CONSIDERING THE FACT THAT THE ASSESSMENT MADE BY THE ASSESSING OFFICER IS ON THE BASIS OF THE ENTRIES MADE IN THE BOOKS OF ACCOUNTS AND INCOME DISCLOSED IN THE RETURN OF INCOME MUCH PRIOR TO SEARCH AND WHICH HAS NO REFERE NCE TO ANY INCRIMINATING MATERIAL FOUND AS A RESULT OF SEARCH AND SEIZURE OPERATION, WE ARE OF THE VIEW THAT THE PROCEEDING I NITIATED 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 PROCEEDING PENDING BEFORE THE ASSESSING OFFICER FOR THE AFORESAID ASSESSMENT YEAR. THEREFORE, IN ABSENCE OF ANY INCR IMINATING MATERIAL SHOWING CONCEALED/UNDISCLOSED INCOME OF THE ASSESSE E, THE ASSESSING OFFICER COULD NOT HAVE PROCEEDED TO ASSESS INCOME W HICH HAS ALREADY BEEN REFLECTED IN THE BOOKS OF ACCOUNTS AND DISCLOS ED IN THE RETURN OF INCOME FILED BY THE ASSESSEE. EVEN OTHERWISE ALSO, CONCLUSION DRAWN BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER TH AT 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 INCOME SHOWN AS AGRICULTURAL INCOME AGAINST WHICH THE DEPA RTMENT IS NOT IN ITA NOS.364 TO 368/VIZAG/2014 AVNASH DEVELOPERS PVT. LTD., VSKP 11 APPEAL. FURTHER, IN THE REMAND REPORT, THE ASSESSI NG OFFICER HIMSELF HAS ACCEPTED THAT THE ASSESSEE HAS EARNED INCOME FR OM COCONUT TREES AND CASURINA PLANTATION WHICH CAN BE CONSIDERED AS AGRICULTURAL INCOME. IN AFORESAID VIEW OF THE MATTER, THE PROCEE DING INITIATED U/S 153C OF THE ACT IN ABSENCE OF ANY INCRIMINATING MAT ERIAL AND ONLY ON THE BASIS OF THE MATERIAL ALREADY DISCLOSED BY THE ASSESSEE IS INVALID AND CONSEQUENTLY THE ASSESSMENT ORDERS PASSED ARE A LSO UNSUSTAINABLE IN LAW. ACCORDINGLY, WE QUASH ASSESSMENT ORDERS PA SSED IN ALL THESE ASSESSMENT YEARS. 5. 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 FOLLOWING THE AFORESAID DECISION OF THE COORDINATE BENCH, WE QUASH THE ASSESSMENT ORDER PASSED FOR ALL THESE ASSESSMENT YE ARS. 6. 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. 7. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLOWED. ITA NO.368/VIZAG/2014: 8. 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 ITA NOS.364 TO 368/VIZAG/2014 AVNASH DEVELOPERS PVT. LTD., VSKP 12 CASE ALSO WE DIRECT THE AO TO DISALLOW 25% OUT OF T HE AGRICULTURAL INCOME DECLARED BY THE ASSESSEE. 9. IN THE RESULT, APPEALS OF THE ASSESSEE IN ITA NO S. 364 TO 367/VIZAG/2014 ARE ALLOWED AND ITA NO.368/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 COPY TO 1. M/S. AVNASH DEVELOPERS PVT. LTD. D.NO.11-8-34, D ASAPALLA HILLS, VISAKHAPATNAM. 2. THE DCIT, CENTRAL CIRCLE, VISAKHAPATNAM 3. THE DCIT, CENTRAL CIRCLE-1, VISAKHAPATNAM 4. THE DCIT, CENTRAL CIRCLE-2, VISAKHAPATNAM 5. THE ACIT, CENTRAL CIRCLE-2, VISAKHAPATNAM 6. THE CIT(A), VISAKHAPATNAM 7 . THE DR, ITAT, VISAKHAPATNAM. 8. GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM