DCIT, New Delhi V. M/s. A.R. Leasing Pvt. Ltd., New Delhi

ITA 3728/DEL/2010

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3587 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-08-2017
• Assessment Year: 2001-2002
• Appeal Filed On: 04-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Keywords: Business income; Search and seizure; Document seized; Documents seized
• Section: 142(1); 153A; 115JB; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.3728/DEL/2010 ASSESSMENT YEAR : 2001-02 DCIT, CENTRAL CIRCLE- 18, NEW DELHI. VS. A.R. LEASING PVT. LTD., 305, 1 ST FLOOR, BHANOT CORNER, PAMPOSH ENCLAVE, G.K.-1, NEW DELHI. PAN : AAACA0423A (APPELLANT) (RESPONDENT) C.O. NO.313/DEL/2010 (IN ITA NO.3728/DEL/2010) ASSESSMENT YEAR : 2001-02 A.R. LEASING PVT. LTD., 305, 1 ST FLOOR, BHANOT CORNER, PAMPOSH ENCLAVE, G.K.-1, NEW DELHI. VS. DCIT, CENTRAL CIRCLE- 18, NEW DELHI. PAN : AAACA0423A (APPELLANT) (RESPONDENT) DEPARTMENT BY : SMT. APARNA KARAN, CIT(DR) ASSESSEE BY : SHRI M. P. RASTOGI, ADV. DATE OF HEARING : 03-08-2017 DATE OF PRONOUNCEMENT : 01-11-2017 O R D E R PER R. K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 03.05.2010 OF CIT(A)-III, DELHI RELATING TO ASSESSM ENT YEAR 2001-02. THE ASSESSEE FILED THE CROSS OBJECTION AGAINST THE APPE AL FILED BY THE REVENUE. FOR 2 ITA NO.3728/DEL/2010 C.O. NO.313/DEL/2010 THE SAKE OF CONVENIENCE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A COMPANY AND IS ENGAGED IN THE BUSINESS OF INVESTMENT IN SHARES AND SECURITIES, SALE/PURCHASE OF SHARES AND SECURITIES. A SEARCH AND SEIZURE OPERAT ION U/S 132 WAS CONDUCTED IN M/S FLEX GROUP OF CASES. CERTAIN DOCUMENTS/BOOKS O F ACCOUNTS BELONGING TO THE ASSESSEE COMPANY WERE SEIZED FROM THE PREMISES OF SHRI HARISH CHATURVEDI, SHRI MANVINDER SINGH AND M/S FLEX INDUSTRIES LTD. I N WHOSE NAMES/CASES WARRANTS OF AUTHORIZATION HAD BEEN ISSUED. IN RESP ONSE TO NOTICE U/S 153C, THE ASSESSEE FILED RETURN OF INCOME ON 08.06.2007 DECLA RING INCOME OF RS.18,004/-. HOWEVER, THE ASSESSEE HAD PAID TAXES ON BOOKS PROFI T OF RS.52,82,705/- U/S 115JB OF THE I.T. ACT. THE ASSESSEE HAD FILED HIS ORIGINAL RETURN OF INCOME U/S 139 ON 15.10.2001 DECLARING INCOME OF RS.18,004/- A ND HAS ALSO PAID TAXES ON BOOK PROFIT OF RS.52,82,705/- U/S 115JB OF THE I.T. ACT. 3. THE ASSESSING OFFICER ISSUED NOTICES U/S 142(1) AND 143(2) ALONG WITH QUESTIONNAIRE. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE EARNED INCOME FR OM SHORT TERM CAPITAL GAIN AMOUNTING TO RS.74,30,429/- FROM THE TRANSACTION OF SHARES OF NIIT. FROM THE DETAILS FURNISHED BY THE ASSESSEE, THE ASSESSING OF FICER NOTED THAT 29,084 SHARES OF NIIT WERE SOLD THROUGH HIS BROKER FOR RS.5,96,65 ,183/- WHICH WERE PURCHASED FOR A CONSIDERATION OF RS.5,22,34,753/-. THIS RESULTED IN THE SHORT 3 ITA NO.3728/DEL/2010 C.O. NO.313/DEL/2010 TERM CAPITAL GAIN OF RS.74,30,429/-. SINCE THE ASS ESSEE COMPANY BASICALLY WAS TO TRADE/DEAL IN SHARES AND SECURITIES AS A CORE AC TIVITY, THE ASSESSING OFFICER REJECTED THE CLAIM OF SHORT TERM CAPITAL GAIN AND T REATED THE INCOME AS BUSINESS INCOME. 4. BEFORE THE LD. CIT(A), APART FROM CHALLENGING TH E MERIT OF THE CASE, THE ASSESSEE CHALLENGED THE VALIDITY OF SECTION 153A PR OCEEDINGS ON THE GROUND THAT NO BOOKS OF ACCOUNT/DOCUMENTS BELONGING TO THE ASSE SSEE WERE FOUND OR SEIZED. THE ASSESSEE REFERRED TO THE SATISFACTION RECORDED BY THE ASSESSING OFFICER U/S 153C AND SUBMITTED THAT THE ACTION U/S 153C HAS BEE N TAKEN ON THE BASIS OF CERTAIN DOCUMENTS SEIZED FROM THE PREMISES OF SHRI MANVINDER SINGH AND M/S FLEX INDUSTRIES LTD.. HOWEVER, THE CONDITION PRECE DENT FOR INVOKING THE PROVISIONS OF SECTION 153C IS THAT THE ASSESSING OF FICER OF THE PERSON IN WHOSE CASE THE SEARCH HAS BEEN CONDUCTED WILL RECORD THE SATISFACTION ON THE BASIS OF DOCUMENTS SEIZED DURING THE SEARCH BELONGING TO SUC H OTHER PERSON AND HAND OVER THE DOCUMENTS, BOOKS OF ACCOUNTS AND OTHER ASS ETS TO THE ASSESSING OFFICER HAVING JURISDICTION OVER THE CASE OF SUCH PERSON. SINCE THE ASSESSING OFFICER HAS NOT PROPERLY ASSUMED THE JURISDICTION U/S 153C AS NO BOOKS OF ACCOUNTS/DOCUMENTS OR OTHER ASSETS BELONGING TO THE ASSESSEE WERE FOUND AND SEIZED FROM THE PREMISES OF SHRI MANVINDER SINGH AN D M/S FLEX INDUSTRIES LTD., THEREFORE, THE ASSESSING OFFICER HAS NOT LEGALLY AS SUMED THE JURISDICTION U/S 4 ITA NO.3728/DEL/2010 C.O. NO.313/DEL/2010 153C OF THE I.T. ACT. RELYING ON VARIOUS DECISIONS THE ASSESSEE ARGUED THAT THE ASSUMPTION MADE U/S 153A/153C SHOULD BE CANCELLED. 5. BASED ON THE ARGUMENT ADVANCED BY THE ASSESSEE A ND FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F NTPC REPORTED IN 229 ITR 383, THE LD. CIT(A) ACCEPTED/ADMITTED THE ADDIT IONAL GROUND. HE REFERRED TO THE SATISFACTION NOTE RECORDED BY THE ASSESSING OFFICER WHICH READS AS UNDER :- SEARCH & SEIZURE OPERATION IN M/S FLEX GROUP OF CA SES WAS CONDUCTED ON 23.02.2006. DURING THE COURSE OF THIS SEARCH, CERT AIN DOCUMENTS/ BOOKS OF ACCOUNTS BELONGING TO THE ASSESSEE COMPANY WERE SEIZED FROM THE PREMISES OF SH. HARISH CHATURVEDI (PARTY A-2), SH. MANVINDER SINGH (PARTY A-10) AND M/S FLEX INDUSTRIES LTD. (NOW M/S. UFLEX LTD. PARTY B-2) IN WHOSE NAMES /CASES WARRANTS OF AUTHORIZATION HAD BEEN ISSUED. THE DOCUMENTS SEIZED FROM VARIOUS PREMISES ARE LISTED AS UNDER : PARTY NOS. PREMISES ANNEXURE PAGE NOS. A-2 RESIDENCE OF SH. HARISH CHATURVEDI A-1 38,91,92 AND95 A-10 RESIDENCE OF SH. MANVINDER SINGH A-4 38 TO 57 A-10 -DO- A-9 9,19 AND 20 -DO- -DO- A-5 -DO- -DO- A-9 9,19 AND 20 B-2 OFFICE OF FLEX INDUSTRIES LTD. A-1 66 TO 70, 91 TO 81,82, 83 AND 84 TO 90, 91 TO 112, 113 AND 119 B-2 -DO- A-7 88 TO 91, 92 TO 95 AND 96 TO 99 B-2 -DO- A-34 5 AND 6 IN THE LIGHT OF THE ABOVE, I AM SATISFIED THAT THE ABOVE CASE IS FIT FOR ASSESSMENT U/S 153C IN ACCORDANCE WITH THE PROVISIONS OF SECTION 1 53A OF THE I.T. ACT AS THE SEIZED DOCUMENTS LISTED ABOVE BELONG TO M/S A.R. LEASING P VT. LTD. BEING A PERSON OTHER THAN THE PERSON WHERE THE SEARCH HAS BEEN INITIATED . HENCE, IN ORDER TO ASSESS/REASSESS THE INCOME OF THE GIVEN ASSESSEE NO TICE U/S 153C IS HEREBY ISSUED FOR ASSESSMENT YEARS 200-01 TO 2005-06. 6. FROM PERUSAL OF THE DOCUMENTS, HE OBSERVED THAT THE DOCUMENTS SEIZED DURING THE SEARCH CANNOT BE TERMED TO BE INDICATING ANY LIMITED INTEREST OF THE 5 ITA NO.3728/DEL/2010 C.O. NO.313/DEL/2010 OWNERSHIP OF THE ASSESSEE IN SUCH DOCUMENTS. HE FU RTHER HELD THAT NO ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER ON THE BASIS OF THESE DOCUMENTS. RELYING ON VARIOUS DECISIONS, HE HELD THAT THE DOCU MENTS SEIZED DO NOT BELONG TO THE ASSESSEE AND THEREFORE, THE ASSESSING OFFICE R WAS NOT JUSTIFYING IN INITIATING THE PROCEEDINGS U/S 153C R.W.S. 153A OF THE I.T. ACT. THEREFORE, THE PROCEEDINGS INITIATED U/S 153C ARE NOT IN ACCORDANC E WITH LAW. HE, THEREFORE, CANCELLED THE ASSUMPTION OF JURISDICTION U/S 153A R .W.S. 153C OF THE I.T. ACT. 7. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL WITH THE FOLLOWING GROUNDS :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE CIT(A) HAS ERRED LAW AND ON FACTS IN ANNULLING THE ASSESSMENT MADE U/S 1 53C? 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) HAS ERRED IN LAW AND ON FACTS BY HOLDING THAT THE SEIZED DOCUMENTS, ON THE BASIS OF WHICH PROCEEDINGS U/S 153C WERE INITIATED, DO NOT BELONG TO THE ASSES SEE? 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) HAS ERRED IN INTERPRETATING SECTION 153A/153C OF THE IT ACT? 4. THE ORDER OF THE CIT(A) IS ERRONEOUS AND NOT TEN ABLE IN LAW AND ON FACTS. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY/ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF THE HEARING O F THE APPEAL. 8. THE ASSESSEE HAS RAISED THE FOLLOWING REVISED GR OUNDS IN THE CROSS OBJECTION :- 1) IT IS CONTENDED THAT THE PROVISIONS OF SECTION 153A OF THE INCOME-TAX ACT, 1961 (THE ACT) ARE NOT APPLICABLE. 2) THE ASSESSMENT HAVING STOOD COMPLETED BEFORE THE DATE OF SEARCH AND NO INCRIMINATING MATERIAL FOUND DURING THE COURSE OF S EARCH, THE DETERMINATION OF INCOME U/S 153C/143(3) READ WITH SECTION 153A OF THE ACT I S WRONG AND ERRONEOUS. 3) THE ABOVE GROUNDS OF APPEAL ARE INDEPENDENT AND WITHOUT PREJUDICE TO ONE ANOTHER. YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR WITHDRAW ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING. 6 ITA NO.3728/DEL/2010 C.O. NO.313/DEL/2010 9. WE HAVE HEARD THE RIVAL ARGUMENTS MADE BY BOTH T HE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE LD. CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED TH E VARIOUS DECISIONS CITED BEFORE US. IT IS AN ADMITTED FACT THAT THE ASSESSE E IN THE INSTANT CASE HAS FILED THE ORIGINAL RETURN OF INCOME ON 15.10.2001 AND NO NOTI CE U/S 143(2) WAS ISSUED TILL 28.02.2003. THEREFORE, THE ASSESSMENT HAS BECOME F INAL. THE SEARCH TOOK PLACE ON 23.02.2006. THE ASSESSMENT BY THE TIME WAS COMP LETED AND HAS NOT ABATED. FURTHER, IT IS ALSO AN ADMITTED FACT THAT THE ADDIT ION HAS NOT BEEN MADE ON THE BASIS OF ANY SEIZED MATERIAL, A FINDING BY THE LD. CIT(A) AND NOT CONTROVERTED BY THE REVENUE. EVEN THE ASSESSMENT ORDER SHOWS THAT THE ASSESSING OFFICER HAS SIMPLY TREATED THE SHORT TERM CAPITAL GAIN OF RS.74 ,30,429/- DECLARED IN THE ORIGINAL RETURN AS BUSINESS INCOME AND THEREBY DENY ING THE BENEFIT OF SET OFF OF LONG TERM CAPITAL LOSS. THIS OTHERWISE INDICATES T HAT THE ADDITION HAS NOT BEEN MADE ON THE BASIS OF ANY SEIZED MATERIAL/INCRIMINAT ING MATERIAL. 10. NOW, THE LAW IS WELL-SETTLED THAT THE COMPLETE ASSESSMENT CANNOT BE DISTURBED BY MAKING ADDITION IN THE ORDER PASSED U/ S 153C/153A IN ABSENCE OF ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH. RECENTLY, THE HON'BLE SUPREME COURT IN THE CASE OF CIT-III, PUNE VS. SINHGAD TECHNICAL EDUCATION SOCIETY VIDE CIVIL APPEAL NO.11080 OF 201 7 ORDER DATED 29.08.2017 HAS CLEARLY LAID DOWN THE LAW THAT IN ABSENCE OF AN Y INCRIMINATING MATERIAL RELATING TO THE CONCERNED ASSESSMENT YEAR, NO ADDIT ION CAN BE MADE IN THE ORDER 7 ITA NO.3728/DEL/2010 C.O. NO.313/DEL/2010 PASSED U/S 153C OF THE I.T. ACT. THE HONBLE DELHI HIGH COURT IN THE CASE OF PR.CIT VS. MEETA GUTGUTIA REPORTED IN 395 ITR 526 H AS HELD THAT ANY AND EVERY DOCUMENT CANNOT BE AND IS NOT AN INCRIMINATING DOCU MENT. NO ADDITION CAN BE MADE FOR A PARTICULAR ASSESSMENT YEAR WITHOUT THERE BEING AN INCRIMINATING MATERIAL QUA THAT ASSESSMENT YEAR WHICH WOULD JUSTI FY SUCH AN ADDITION. THE JURISDICTIONAL HIGH COURT WHILE DECIDING THE ISSUE HAS FOLLOWED ITS EARLIER DECISION IN THE CASE OF CIT VS. KABUL CHAWALA REPOR TED IN 388 ITR 573 AND VARIOUS OTHER DECISIONS OF DIFFERENT HIGH COURTS. SINCE IN THE INSTANT CASE ADMITTEDLY THE ASSESSMENT WAS COMPLETED AND ADDITIO N IS NOT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF S EARCH, THEREFORE, THE ASSUMPTION OF JURISDICTION U/S 153C AND PASSING OF THE OTHER U/S 153C/153A IS NOT IN ACCORDANCE WITH LAW. THEREFORE, THE ASSESSM ENT ORDER HAS TO BE QUASHED. THE GROUNDS IN CROSS OBJECTION ARE ACCORDINGLY ALLO WED. SINCE THE ASSESSEE SUCCEEDS ON THIS LEGAL GROUND, THE GROUNDS RAISED B Y THE REVENUE BECOME ACADEMIC IN NATURE AND, THEREFORE, ARE NOT BEING AD JUDICATED. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 01 ST DAY OF NOVEMBER, 2017. SD/- SD/- (SUCHITRA KAMBLE) (R. K. P ANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 01-11-2017. SUJEET 8 ITA NO.3728/DEL/2010 C.O. NO.313/DEL/2010 COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A) 5) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI