Ascot Investments, New Delhi V. ACIT, New Delhi

ITA 384/DEL/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2970 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 26-04-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 22-01-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RANI JAIN
• Assessee Lawyers: ASHISH GOEL
• Keywords: Capital asset; Business income; Search and seizure; Documents seized
• Section: 153A; 132; 15

Judgement Text

ITA NOS. 384 & 385/DEL/2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDEN T & SHRI K.N. CHARY, JUDICIAL MEMBER ITA NOS.- 384 & 385/DEL/2013 ( ASSESSMENT YEARS: 200809 & 2010-11) ASCOT INVESTMENTS 626, 6 TH FLOOR, TOWER-A, DLF TOWER, JASOLA, NEW DELHI. AAMFA6159Q VS ACIT CENTRAL CIRCLE 25 NEW DELHI. ASSESSEE BY SH.VED JAIN, ADV. & SH. ASHISH GOEL, CA REVENUE BY SH. RANI JAIN, CIT DR ORDER PER BENCH: THESE APPEALS CHALLENGING THE ORDER DATED 14.11.20 12 IN APPEAL NOS. 364 & 366/2011-12 ON THE FILE OF THE CO MMISSIONER OF INCOME TAX (APPEALS)-1, NEW DELHI. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM OF WHICH ONE SATISH KUMAR GUPTA, SAMEER GUPTA AND SUNDEEP GUPTA ARE THE PARTNERS AND IT WAS CONSTITUT ED ON 10.04.2006 FOR MAKING INVESTMENTS. PURSUANT TO THE SEARCH AND SEIZURE OPERATIONS THAT WERE CONDUCTED IN THE PREMI SES OF THE PARTNERS OF THE FIRM ON 10.02.2012 AND NOTICE U/S 1 53C OF THE DATE OF HEARING 01.05.2017 DATE OF PRONOUNCEMENT 05 .05.2017 ITA NOS. 384 & 385/DEL/2013 2 ACT, FOR THE AY 2008-09, THE ASSESSEE FILED RETURN OF INCOME OF RS. 4,88,38,540/-. AO COMPUTED THE INCOME OF THE ASSES SEE AT RS. 6,71,69,500/- TREATING THE INCOME EARNED FROM INVES TMENTS AS BUSINESS INCOME, AS AGAINST THE SHORT TERM AND LONG TERM CAPITAL GAINS CLAIMED BY THE ASSESSEE. APPEAL PREFERRED BY THE ASSESSEE WAS ALLOWED IN PART BY THE LD.CIT (A) HOLDING THAT THE INCOME ON THE SALE OF CAPITAL ASSETS SHOULD BE TREATED AS CAP ITAL GAIN, AND THE EXPENDITURE ON PMS CANNOT BE ADDED BACK TO THE BUSINESS INCOME OF THE ASSESSEE. 3. AGGRIEVED BY THIS FINDING OF THE LD. CIT (A) THE ASSESSEE IS BEFORE US IN THIS APPEAL VEHEMENTLY CONTENDED THAT THE PROCEEDINGS INITIATED U/S 153C OF THE ACT ARE BAD A ND ARE LIABLE TO BE QUASHED IN THE ABSENCE OF ANY SATISFACTION RECOR DED BY THE AO OF THE SEARCHED PERSON THAT THE INCRIMINATING MATER IAL BELONGING TO THE ASSESSEE WAS FOUND DURING THE COURSE OF SUCH SEARCH. BESIDES THIS IT IS ALSO STATED IN THE GROUNDS THAT PMS AMOUNTING TO RS. 69,29,808/- IS BEING ELIGIBLE WHILE COMPUTIN G THE CAPITAL GAIN AND CANNOT BE ADDED TO THE BUSINESS INCOME OF THE ASSESSEE. 4. CONTENTION OF THE LD.AR IS TWOFOLD. ONE IS THAT, UNLESS AND UNTIL THE AO OF THE PERSON SEARCHED RECORDS THE SAT ISFACTION NOTE TO THE EFFECT THAT THE SEIZED ASSETS OR THE DOCUMEN T BELONGS TO A ITA NOS. 384 & 385/DEL/2013 3 PERSON OTHER THAN THE SEARCHED PERSON, THE AO OF TH E OTHER PERSON DOES NOT GET JURISDICTION TO PROCEED WITH TH E MATTER. THE OTHER CONTENTION IS THAT UNLESS AND UNTIL THE DOCUM ENT THAT WAS FOUND DURING THE SEARCH IS INCRIMINATORY IN NATURE QUA THE ASSESSEE, NO PROCEEDINGS U/S 153C OR 153A CAN BE IN ITIATED. 5. LD. DR PLACED RELIANCE ON THE DECISION REPORTED IN PCIT VS. M/S NAU NIDH OVERSEAS PVT. LTD. IN ITA NO. 58 OF 20 17 (DEL) (HC) DATED 03.02.2017 FOR THE PRINCIPLE THAT WHERE THE A O IS COMMON FOR THE PERSON SEARCHED AND THE OTHER PERSON, HE HA D JURISDICTION TO COMPLETE THE ASSESSMENT IN RESPECT OF BOTH THE S EARCHED PERSONS AND THE THIRD PARTY, AND FOR THE PURPOSE OF SECTION 153C THE SATISFACTION OF THE AO OF THE OTHER PERSON IS S UFFICIENT. PER CONTRA, LD. AR PLACED RELIANCE ON THE DECISION REPO RTED IN PCIT VS. M/S SUPER MALLS PVT. LTD. (2016) 11 TMI 1370 (DEL) (HC) IN ITA NO. 449 OF 2016 DATED 22.11.2016 IN SUPPORT OF HIS CONTENTION THAT IN NAU NIDHS CASE THE HONBLE JURISDICTIONAL HIGH COURT PLACED RELIANCE ON ITS OWN DECISION IN PCIT VS. M/S SUPER MALLS PVT. LTD. (2016) 11 TMI 1370 (DEL) (HC) IN ITA NOS. 449-451 & 453 OF 2016 DATED 22.11.2016 AND SUBMITTED THAT IN BOTH NAU NIDH OVERSEAS CASE (SUPRA) AND M/S SUPER MALLS P. L TD. CASE (SUPRA) THE PERSON CONFESS HAPPENED TO BE ONE OF TH E DIRECTORS OF ITA NOS. 384 & 385/DEL/2013 4 THE ASSESSEE AS SUCH THE HONBLE HIGH COURT HELD TH AT THE SATISFACTION OF THE SEARCHED PERSON OR THE OTHER PE RSON IS SUFFICIENT. HOWEVER, HE PLACED RELIANCE ON THE DEC ISIONS OF THE JURISDICTIONAL HIGH COURT IN CIT VS. RRJ SECURITIES LTD. (2015) 11 TMI 19 (DEL) (HC) ITA NO. 164 OF 2015 DATED 30.1 0.2015 AS APPROVED IN ARN INFRASTRUCTURE INDIA LTD. 2017 (4) TMI 1194 (DELHI) FOR THE PRINCIPLE THAT IN THE CASE OF A SEA RCHED PERSON THE AO OF THE SEARCHED PERSON ASSUMES POSSESSION OF SEI ZED ASSETS/DOCUMENTS ON SEARCH OF THE ASSESSEE; THE SEI ZED ASSETS/DOCUMENTS BELONGING TO A PERSON OTHER THAN A SEARCHED PERSON COME INTO POSSESSION OF THE AO OF THAT PERSO N ONLY AFTER THE AO OF THE SEARCHED PERSON IS SATISFIED THAT THE ASSETS/DOCUMENTS DO NOT BELONG TO THE SEARCHED PERS ON AND THE DATE ON WHICH THE AO OF THE PERSON OTHER THAN THE O NE SEARCHED ASSUMES THE POSSESSION OF THE SEIZED ASSETS WOULD B E THE RELEVANT DATE FOR APPLYING THE PROVISIONS OF SECTION 153A OF THE ACT. IN ARN INFRASTRUCTURE INDIA LTD. VS. ACIT (2017) 4 TMI 1194 (DEL) (HC) IN W.P. (C) NO. 2768 OF 2016 DATED 25.04.2017 THE HONBLE HIGH COURT FURTHER HELD THAT THE DECISION IN CIT VS . RRJ SECURITIES LTD. (SUPRA) IS ALSO AN AUTHORITY FOR TH E PROPOSITION THAT FOR THE PROCEEDINGS U/S 153C TO BE VALID, THERE HAD TO BE A SATISFACTION NOTE RECORDED BY THE AO OF THE SEARCHE D PERSON. HE ITA NOS. 384 & 385/DEL/2013 5 FURTHER PLACED RELIANCE ON THE DECISION REPORTED IN NARSI CREATIONS VS. DCIT (2016) 6 TMI 83 (DEL) (ITAT) IN ITA NO. 31 88 TO 3194/DEL/2013 DATED 10.05.2016 FOR THE PRINCIPLE THAT RECORDING OF SATISFACTION BY THE ASSESSING OFFICER OF THE PER SON SEARCHED THAT ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABL E ARTICLE OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS SEIZED BELON G TO THE PERSON OTHER THAN THE PERSON SEARCHED IS A SINE QUA NON FOR INITIATING ACTION U/S 153C. 6. LD. DR PLACED RELIANCE ON THE DECISION OF THE HO NBLE KERALA HIGH COURT IN E.N. GOPI KUMAR VS. CIT ITA NO. 31/20 16 FOR THE PRINCIPLE THAT THE ASSESSMENT PROCEEDINGS GENERATED BY THE ISSUANCE OF A NOTICE U/S 153A(1)(A) OF THE ACT CAN BE CONCLUDED AGAINST THE INTEREST OF THE ASSESSEE INCLUDING MAKI NG ADDITIONS EVEN WITHOUT ANY INCRIMINATING MATERIAL BEING AVAIL ABLE AGAINST THE ASSESSEE IN THE SEARCH U/S 132 OF THE ACT ON TH E BASIS OF WHICH THE NOTICE WAS ISSUED U/S 153A(1)(A) OF THE A CT. PER CONTRA, IT IS THE SUBMISSION OF THE LD. AR THAT THE REASONS RECORDED COULD ONLY SHOW THAT THE PRINT OUT OF THE CONTENTS OF HAR D DISK REVEALED THAT THERE ARE TRANSACTIONS IN HDFC BANK ACCOUNT NO . 034174007 OF THE ASSESSEE AS SUCH PROCEEDINGS U/S 1 53C ARE INITIATED. HE FURTHER SUBMITTED THAT NOTHING IS AD DED ON THE BASIS ITA NOS. 384 & 385/DEL/2013 6 OF THE ENTRIES IN THIS ACCOUNT AND THIS WAS THE REG ULAR ACCOUNT OF THE ASSESSEE DECLARED TO THE DEPARTMENT. HE PLACED RELIANCE ON THE DECISION OF THE TRIBUNAL IN M/S GLOBAL REALTY C REATIONS LTD. VS. DCIT (2017) 4 TMI 470 (DEL) (ITAT) IN ITA NO. 1 245/DEL/2014 DATED 07.04.2017 FOR THE PRINCIPLE THAT WITHOUT ANY INCRIMINATING MATERIAL FOUND DURING THE SEARCH AND SEIZURE OPERAT IONS NO ADDITIONS ARE SUSTAINABLE. FURTHER IN THE DECISION REPORTED IN M/S BEST INFRASTRUCTURE (INDIA) PVT. LTD. VS. DCIT IN ITA NO. 2739/DEL/2014 DATED 08.02.2017 THE COORDINATE BENCH OF THIS TRIBUNAL FOLLOWING THE DECISION IN KABUL CHAWLAS C ASE AND RRJ SECURITIES HELD THAT UNLESS AND UNTIL THERE IS INCR IMINATORY MATERIAL AGAINST THE ASSESSEE NO PROCEEDINGS U/S 15 3C ARE MAINTAINABLE AGAINST THE ASSESSEE. 7. WE HAVE CAREFULLY GONE THROUGH THE RECORD. INSO FAR AS THE FIRST CONTENTION AS TO THE RECORDING OF SATISFACTIO N OF THE AO OF THE PERSON SEARCHED TO BE NECESSARY FOR ASSUMPTION OF J URISDICTION BY THE AO OF THE OTHER PERSON IS CONCERNED, THE LATEST DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN ARN INFRASTRUC TURES DELIVERED ON 25.04.2017 IS SPECIFIC TO THE POINT TH AT THE DECISION IN CIT VS. RRJ SECURITIES LTD. (2015) 11 TMI 19 (DE L) (HC) IN ITA NO. 164/DEL/2015 DATED 30.10.2015 IS AN AUTHORITY F OR THE ITA NOS. 384 & 385/DEL/2013 7 PROPOSITION THAT FOR THE PROCEEDINGS U/S 153C TO BE VALID, THERE HAD TO BE A SATISFACTION NOTE RECORDED BY THE AO OF THE SEARCHED PERSON, WHICH IS CONSPICUOUSLY ABSENT IN THIS CASE. THE JUDGMENT IN A.R. INFRASTRUCTURE INDIA LTD. IS LATES T IN POINT OF TIME AND BINDS THIS TRIBUNAL ON THIS ASPECT. 8. FURTHER IN SO FAR AS THE ENTRIES OF HDFC BANK AR E CONCERNED THERE IS NO DENIAL OF THE FACTS SUBMITTED BY THE LD . AR THAT THERE IS NO ADVERSE COMMENT BY THE AO IN RESPECT OF SUCH ENTRIES AND THERE IS NO DENIAL FROM THE REVENUE THAT SUCH AN AC COUNT IS THE REGULAR ACCOUNT OF THE ASSESSEE DECLARED TO THE DEP ARTMENT OVER THE YEARS. ADMITTEDLY, NOTHING INCRIMINATORY COULD BE FOUND IN THE ENTRIES. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. KA BUL CHAWLA (DEL) (HC) IN ITA NO. 707 OF 2014 AND RRJ SECURITIE S CASE (2015) 11 TMI 19 (DEL) (HC) IN ITA NO. 164/DEL/2015 DATED 30.10.2015 HOLD THAT NO ADDITION COULD BE MADE ON THE BASIS OF ANY MATERIAL WHICH IS NOT INCRIMINATORY IN NATURE. 9. FOR THE REASONS SET FORTH IN THE PRECEDING PARAG RAPHS, WHILE RESPECTFULLY FOLLOWING THE DECISIONS OF THE HONBLE JURISDICTIONAL HIGH COURT, WE FIND THAT THE PROCEEDINGS U/S 153C O F THE ACT WITHOUT RECORDING THE SATISFACTION OF THE AO OF THE SEARCHED ITA NOS. 384 & 385/DEL/2013 8 PERSON TO THE EFFECT THAT THE DOCUMENTS THAT WERE F OUND IN THE SEARCH DO NOT BELONG TO THE SEARCHED PERSON AND TH EY BELONG TO THE OTHER PERSON THAN THE SEARCHED ONE, ARE BAD UND ER LAW AND FURTHER THAT WITHOUT ANY INCRIMINATORY MATERIAL AGA INST THE ASSESSEE NO ADDITIONS COULD BE MADE AGAINST THEM. WE, THEREFORE, QUASH THE ORDERS OF THE AUTHORITIES BELO W. 10. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05 TH MAY, 2017 SD/- SD/- (G.D. AGRAWAL) (K. NARSIMHA CHAR RY) PRESIDENT JUDICIAL MEMBER DATED: 05.05.2017 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI ITA NOS. 384 & 385/DEL/2013 9 DRAFT DICTATED ON 01.05.2017/ 02.05.2017 DRAFT PLACED BEFORE AUTHOR 03.05.2017 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. APPROVED DRAFT COMES TO THE SR.PS/PS 05.05.17 KEPT FOR PRONOUNCEMENT ON 05.05.17 FILE SENT TO THE BENCH CLERK 08.05.17 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.