BEEJAY SECURITY & FINANCE LTD, MUMBAI V. ACIT CEN CIR -9, MUMBAI

ITA 4861/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49360 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 14-06-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 24-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOLI SRINIWAS RAO
• Assessee Lawyers: D V LAKHANI
• Keywords: Business income; Loose papers; Document seized; Principle of natural justice; Block assessment; Documents seized
• Section: 153A; 147; 148; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H, MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI R.K.PANDA (A .M) ITA NO.4859/MUM/2009(A.Y. 2001-02) ITA NO.4860/MUM.2009(A.Y. 2002-03) ITA NO.4861/MUM/2009(A.Y. 2003-04) ITA NO.4862/MUM/2009(A.Y.2004-05) ITA NO.4863/MUM/2009(A.Y.2005-06) ITA NO.4864/MUM/2009(A.Y.2006-07) ITA NO.4865/MUM/2009(A.Y.2007-08) BEEJAY SECURITY & FINANCE LTD. 17, KAMER BLDG., 38, CAWASJI PATEL STREET, FORT, MUMBAI 400 023. PAN:AAACB 2723J (APPELLANT) VS. THE ACIT, CEN. CIR.9, MUMBAI. (RESPONDENT) APPELLANT BY : SHRI D.V.LAKHANI RESPONDENT BY : SHRI GOLI SRINIWAS RAO ORDER PER BENCH, THESE ARE APPEALS BY THE ASSESSEE AGAINST COMMON ORDER DATED 3/7/2009 OF CIT(A) VII, MUMBAI RELATING TO ASSESSME NT YEAR 2001-02 TO 2007-08. GROUND NO.1 TO 3 RAISED BY THE ASSESSEE WHICH IS COMMON IN ALL THE APPEALS READ AS FOLLOWS: 1. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE A PPELLANT SUBMIT THAT THE ORDER PASSED BY THE LEARNED ASSESSING OFFI CER IS BAD IN LAW AS THE BASIC CONDITIONS IF ISSUE OF NOTICE U/S. 153C A RE NOT SATISFIED. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE A PPELLANT PRAYS THAT THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER I S UNLAWFUL, INVALID AND WITHOUT EXERCISE OF PROPER JURISDICTION. THE A PPELLANT PRAYS THAT THE ORDER MAY BE TREATED AS BAD IN LAW. ITA NO.4859/M/09 TO 4865/M/09 2 3. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE APP ELLANT SUBMIT THAT THE ORDER PASSED BY HE LEARNED ASSESSING OFFICER IS AGAINST THE PRINCIPLE OF NATURAL JUSTICE AND WITHOUT GIVING PRO PER OPPORTUNITY OF HEARING. 2. THE FACTS MATERIAL FOR ADJUDICATION OF THE AFORE SAID GROUNDS ARE AS FOLLOWS. THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT AND DEALING IN PROPERTIES. A SE ARCH AND SEIZURE OPERATION UNDER SECTION 132 OF THE INCOME TAX ACT, 1961 (THE ACT) WAS INITIATED ON 4/10/2006 IN THE CASE OF ONE M/S.REHAB HOUSING PVT. LTD., AND M/S.SECURE SAFE VALUTS LTD., AT GITANEEL ARCADE, 5 TH FLOOR, HILL ROAD, BANDRA(W), MUMBAI 50. IN THE COURSE OF SUCH SEAR CH, AMONG OTHERS, TWO DOCUMENTS WERE FOUND NAMELY A COPY OF THE LEASE DEE D DATED 6/8/2000 BY WHICH THE PREMISES BEARING 401, 4 TH FLOOR VINTAGE PEARL CO-OP. HSG. SOCIETY LTD., 29 TH ROAD, BANDRA (W), MUMBAI OWNED BY THE ASSESSEE WAS GIVEN ON LEASE TO A COMPANY NAMED M/S. REDDIFF.COM INDIA LTD . ANOTHER DOCUMENT WHICH WAS FOUND WAS THE MEMORANDUM AND ARTICLE OF A SSOCIATION OF THE ASSESSEE COMPANY. THE DDI(INV), UNIT 7(2) WHO HAD CONDUCTED THE SEARCH HAD CALLED UPON THE ASSESSEE TO EXPLAIN THE LOOSE P APERS SEIZED AT THE TIME OF SEARCH IN THE CASE OF M/S. SECURE SAFE VALUTS LTD., WHICH IS A SISTER COMPANY OF THE ASSESSEE. THE ASSESSEE BY ITS REPLY DATED 22/3/2007 ADDRESSED TO THE DDIT (INV) ,UNIT 7(2) SUBMITTED ON THE SEIZED DOCUMENTS REFERRED TO ABOVE THAT THE INCOME FROM LEASE OF THE PREMISES COVERED BY THE SEIZED DOCUMENT HAS ALREADY BEEN RECORDED IN THE BO OKS OF ACCOUNTS OF THE ASSESSEE AND DECLARED IN THE RETURNS OF INCOME FILE D BY THE ASSESSEE. THE REPLY IN THIS REGARD WAS AS FOLLOWS: PAGES 17 TO 39: LEAVE LICENCE AGREEMENT DATED 6 TH AUG.2000 BY BEEJAY SECURITY AND FINANCE LTD. FOR LEASE OF THEI R FLAT TO REDDIF.COM INDIA LTD. TRANSACTION AND INCOME DULY RECORDED IN THE BOOKS OF ITA NO.4859/M/09 TO 4865/M/09 3 ACCOUNT OF BEEJAY SECURITY & FINANCE LTD. DURING TH E TENURE OF LEASE AGREEMENT. 3. THEREAFTER THE ACIT, CC-10, MUMBAI, WHO WAS THE THEN ASSESSING OFFICER OF THE ASSESSEE AS WELL THE PERSONS SEARCHED RECORD ED THE FOLLOWING SATISFACTION NOTE ON 23.3.2007 FOR ISSUE OF NOTICE UNDER SECTION 153COF THE ACT. AS PER ANNEXURE 81 TO 64 PAGES ( AS PER A.R PAG E 57) AND ANNEXURE A-7 PAGES 17 TO 39 ( AS PER A.R 60, A LEAS E AGREEMENT OF ASSESSEES FLAT TO REDIFF.COM (I) LTD. ARE FOUND A ND SEIZED. TO VERIFY THESE TRANSACTIONS RECOURSE TO SEC. 153C ARE REQUIR ED TO BE TAKEN. THEREFORE, NOTICE U/S.153C 4. THE PROVISIONS OF SECTION 153C IN SO FAR AS IT I S RELEVANT FOR THE PRESENT APPEAL, READS AS FOLLOWS: 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, BULL ION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DO CUMENTS SEIZED OR REQUISITIONED BELONGS OR BELONG TO A PERSON OTHER T HAN 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 IS SUE SUCH OTHER PERSON NOTICE AND ASSESS OR REASSESS INCOME OF SUCH OTHER PERSON IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A :] 96A [ PROVIDED THAT IN CASE OF SUCH OTHER PERSON, THE REFERENCE T O THE DATE OF INITIATION OF THE SEARCH UNDER SECTION 132 OR MAKING OF REQUISITION UNDER SECTION 132A IN THE SECOND PROVISO TO [SUB-SECTION (1) OF] SECTION 153A SHALL BE CONSTRUED AS REFERENCE TO THE DATE OF RECE IVING THE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIO NED BY THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON. ] [(2) WHERE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED AS REFERRED TO IN SUB-SECTION (1) HAS OR HAVE BEEN RECEIVED BY THE ASSESSING OFFICER HAVING JURISDICTION OVER S UCH OTHER PERSON AFTER THE DUE DATE FOR FURNISHING THE RETURN OF INCOME FO R THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SEARCH IS CO NDUCTED UNDER SECTION ITA NO.4859/M/09 TO 4865/M/09 4 132 OR REQUISITION IS MADE UNDER SECTION 132A AND IN RESPECT OF SUCH ASSESSMENT YEAR ( A ) NO RETURN OF INCOME HAS BEEN FURNISHED BY SUCH OT HER PERSON AND NO NOTICE UNDER SUB-SECTION (1) OF SECTION 142 HAS BEEN ISSUED TO HIM, OR ( B ) A RETURN OF INCOME HAS BEEN FURNISHED BY SUCH OTH ER PERSON BUT NO NOTICE UNDER SUB-SECTION (2) OF SECTION 143 HAS BEEN SERVED AND LIMITATION OF SERVING THE NOTICE UNDER SUB-SECTION (2) OF SECTION 143 HAS EXPIRED, OR ( C ) ASSESSMENT OR REASSESSMENT, IF ANY, HAS BEEN MADE , BEFORE THE DATE OF RECEIVING THE BOOKS OF ACCOUNT O R DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED BY THE ASSESSING OFF ICER HAVING JURISDICTION OVER SUCH OTHER PERSON, SUCH ASSESSING OFFICER SHALL ISSUE THE NOTICE AND ASSESS OR REASSESS TOTAL INCOME OF S UCH OTHER PERSON OF SUCH ASSESSMENT YEAR IN THE MANNER PROVIDED IN SECTION 153A .] 5. THE PROVISIONS OF SEC.153-A OF THE ACT, READS A S FOLLOWS: 153A. ASSESSMENT IN CASE OF SEARCH OR REQUISITION.( 1) NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 139, SECTION 147, SEC TION 148, SECTION 149, SECTION 151 AND SECTION 153, IN THE CASE OF A PERSON WHERE A SEARCH IS INITIATED UNDER SECTION 132 OR BOOKS OF A CCOUNT, OTHER DOCUMENTS OR ANY ASSETS ARE REQUISITIONED UNDER SEC TION 132A AFTER THE 31ST DAY OF MAY, 2003, THE ASSESSING OFFICER SH ALL (A) ISSUE NOTICE TO SUCH PERSON REQUIRING HIM TO FU RNISH WITHIN SUCH PERIOD, AS MAY BE SPECIFIED IN THE NOTICE, THE RETU RN OF INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS REFERRED TO IN CLAUSE (B), IN THE PRESCRIBED FORM A ND VERIFIED IN THE PRESCRIBED MANNER AND SETTING FORTH SUCH OTHER PART ICULARS AS MAY BE PRESCRIBED AND THE PROVISIONS OF THIS ACT SHALL, SO FAR AS MAY BE, APPLY ACCORDINGLY AS IF SUCH RETURN WERE A RETURN REQUIRE D TO BE FURNISHED UNDER SECTION 139 ; (B) ASSESS OR REASSESS THE TOTAL INCOME OF SIX ASSE SSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUISITI ON IS MADE : PROVIDED THAT THE ASSESSING OFFICER SHALL ASSESS OR REASSESS THE TOTAL INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING W ITHIN SUCH SIX ASSESSMENT YEARS : ITA NO.4859/M/09 TO 4865/M/09 5 PROVIDED FURTHER THAT ASSESSMENT OR REASSESSMENT, I F ANY, RELATING TO ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF SI X ASSESSMENT YEARS REFERRED TO IN THIS SUB-SECTION PENDING ON THE DATE OF INITIATION OF THE SEARCH UNDER SECTION 132 OR MAKING OF REQUISITION U NDER SECTION 132A, AS THE CASE MAY BE, SHALL ABATE. (2) IF ANY PROCEEDING INITIATED OR ANY ORDER OF ASS ESSMENT OR REASSESSMENT MADE UNDER SUB-SECTION (1) HAS BEEN AN NULLED IN APPEAL OR ANY OTHER LEGAL PROCEEDING, THEN, NOTWITHSTANDIN G ANYTHING CONTAINED IN SUB-SECTION (1) OR SECTION 153, THE AS SESSMENT OR REASSESSMENT RELATING TO ANY ASSESSMENT YEAR WHICH HAS ABATED UNDER THE SECOND PROVISO TO SUB-SECTION (1), SHALL STAND REVIVED WITH EFFECT FROM THE DATE OF RECEIPT OF THE ORDER OF SUCH ANNUL MENT BY THE COMMISSIONER : PROVIDED THAT SUCH REVIVAL SHALL CEASE TO HAVE EFFE CT, IF SUCH ORDER OF ANNULMENT IS SET ASIDE. EXPLANATION.FOR THE REMOVAL OF DOUBTS, IT IS HEREB Y DECLARED THAT, (I) SAVE AS OTHERWISE PROVIDED IN THIS SECTION, SE CTION 153B AND SECTION 153C, ALL OTHER PROVISIONS OF THIS ACT SHAL L APPLY TO THE ASSESSMENT MADE UNDER THIS SECTION ; (II) IN AN ASSESSMENT OR REASSESSMENT MADE IN RESP ECT OF AN ASSESSMENT YEAR UNDER THIS SECTION, THE TAX SHALL B E CHARGEABLE AT THE RATE OR RATES AS APPLICABLE TO SUCH ASSESSMENT YEAR . 6. THE PROVISIONS OF SECTION 153A OF THE ACT WERE INTRODUCED BY THE FINANCE ACT, 2003 WITH EFFECT FROM 1-6-2003. IN RESPECT OF SEARCHES CARRIED OUT UNDER SECTION 132 OF THE ACT OR REQUISITION OF BOOKS AND OTHER DOCUMENTS MADE UNDER SECTION 132A OF THE ACT AFTER 31-5-2003 THE A SSESSING OFFICER SHALL ISSUE A NOTICE CALLING UPON ASSESSEE TO FURNISH RET URN OF INCOME IN RESPECT OF SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING ASSESSME NT YEAR RELEVANT TO THE ASSESSMENT YEAR IN WHICH SEARCH IS CONDUCTED OR REQ UISITION IS MADE. THE ASSESSING OFFICER IS EMPOWERED TO RE-ASSESS THE TOT AL INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITH SUCH SIX ASSESSME NT YEARS UNDER THE ITA NO.4859/M/09 TO 4865/M/09 6 SECOND PROVISO TO SECTION 153A OF THE ACT. IF IN RE SPECT OF ANY ASSESSMENT YEAR FALLING WITHIN THE SIX ASSESSMENT YEARS REFERR ED TO EARLIER, ANY ASSESSMENT OR RE-ASSESSMENT IS PENDING ON THE DATE OF INITIATION OF THE SEARCH UNDER SECTION 132 OF THE ACT OR MAKING OF RE QUISITION UNDER SECTION 132A, THE SAME SHALL ABATE. IN TERMS OF SEC.153-C OF THE ACT, IF IN THE COURSE OF SEARCH OF A PERSON U/S.132 OF THE ACT, AN Y MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOO KS OF ACCOUNT OR DOCUMENTS SEIZED OR REQUISITIONED BELONGS OR BELONG TO A PERS ON OTHER THAN THE PERSON WHO IS SEARCHED U/S.132 OF THE ACT, THEN THE AO OF THE PERSON IN WHOSE CASE SEARCH UY/S.132 OF THE ACT HAS BEEN CARRIED OUT HAS TO ARRIVE AT A SATISFACTION THAT MONEY, BULLION, JEWELLERY OR OTH ER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS SEIZED BELONG TO S OME OTHER PERSON. ON ARRIVING AT SUCH SATISFACTION, HE HAS TO HAND OVER THE DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED TO THE ASSESSING OFFICER HA VING JURISDICTION OVER SUCH OTHER PERSON AND THAT ASSESSING OFFICER SHALL PROCE ED 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 OF THE ACT. 7. THE ACIT, CC-10, HAVING RECORDED SATISFACTION FO R PROCEEDING AGAINST THE ASSESSEE U/S.153-C OF THE ACT, HOWEVER ISSUED A NOTICE UNDER SECTION 153A OF THE ACT WHICH PROVISIONS ARE APPLICABLE TO THE PERSON IN WHOSE CASE A SEARCH UNDER SECTION 132 OF THE ACT HAS BEEN COND UCTED. THIS NOTICE UNDER SECTION 153A IS DATED 26/3/2007. THE CASE WA S LATER TRANSFERRED ON 19/8/2008 TO THE ACIT, CC 9, MUMBAI TO WHOM THE CAS E STOOD TRANSFERRED FROM ACIT, CC 10, MUMBAI. THE ORDER OF ASSESSMENT WAS PASSED BY THE ACIT, CC-4, MUMBAI. 8. BEFORE CIT(A) THE ASSESSEE SUBMITTED THAT THERE WAS NO SEARCH IN THE CASE OF THE ASSESSEE UNDER SECTION 132 OF THE ACT A ND, THEREFORE, THE NOTICE ITA NO.4859/M/09 TO 4865/M/09 7 UNDER SECTION 153A ISSUED BY THE ACIT, CC-10 MUMBAI BASED ON WHICH THE ULTIMATE ORDER OF ASSESSMENT UNDER SECTION 153C OF THE ACT WAS PASSED WAS ILLEGAL. IT WAS SUBMITTED THAT NO NOTICE UNDER SEC TION 153C WAS ISSUED NOR ANY SATISFACTION RECORDED BY THE ASSESSING OFFICER BEFORE ISSUE OF NOTICE UNDER SECTION 153C OF THE ACT. IT WAS FURTHER SUBM ITTED THAT THERE WAS NO SATISFACTION NOTE ON THE FILE OF THE ASSESSING OFFI CER NAMELY ACIT, CC-9, MUMBAI. THIS SUBMISSION WAS MADE BY THE ASSESSEE A FTER TAKING INSPECTION OF THE RECORDS OF ASSESSMENT. IT IS NOT IN DISPUT E THAT ONE MR. SANKARAN, THE ACCOUNTANT OF THE ASSESSEE WAS REPRESENTING BEF ORE THE ASSESSING OFFICER IN THE ASSESSMENT PROCEEDINGS. IN REMAND REPORT FI LED BY THE ASSESSING OFFICER BEFORE THE CIT(A) THE ASSESSING OFFICER SUB MITTED AS FOLLOWS: REGARDING POINT NO.5 & 6 DURING THE COURSE OF ASSE SSMENT PROCEEDINGS NOTICES ISSUED U/S. 153A BY THE THEN A O, CENTRAL CIRCLE 10 MUMBAI HAVE BEEN CORRECTED AS 153C IN BOTH THE N OTICES AS WELL AS RETURNS FILED IN AGREEMENT WITH THE ACCOUNTANT OF T HE ASSESSEE, AND THE ASSESSMENT HAVE BEEN PASSED U/S. 153C R.W.S. 14 3(3), WHEREIN THE SATISFACTION OF THE AO HAVE BEEN INCORPORATED IN TH E BODY OF ASSESSMENT ORDER ITSELF IN FIRST PARA THEREOF. IT IS ALSO A FACT THAT IN SEARCH LOOSE PAPERS MENTIONED ABOVE WERE SEIZED PER TAINING TO THE ASSESSEE. DURING THE COURSE OF INSPECTION BY THE ASSESSEE THE SATISFACTION RECORDED BY THE AO WAS MISPLACED, THEREFORE ON THE DATE OF INSPECTION. IT COULD NOT BE MADE AVAILABLE. HOWEVER, IT IS TRA CED OUT AND FOUND THAT THE THEN AO CC 10, HAD KEPT ALL THE SATISFACTI ON NOTES OF THE GROUP CASES IN A SEPARATE FOLDER. 9. ON CONSIDERATION OF THE REMAND REPORT THE CIT(A) WAS OF THE VIEW THAT THERE WAS A PROPER SATISFACTION RECORDED FOR PROCEE DINGS UNDER SECTION 153C OF THE ACT. THE CIT(A) HELD AS FOLLOWS: 6. I HAVE CAREFULLY CONSIDERED THE ABOVE FACTS AN D DO NOT FIND ANY MERIT IN THE CONTENTIONS OF THE APPELLANT. THERE IS NO DISPUTING FACT THAT IN THE COURSE OF SEARCH IN THE GROUP, CERTAI N PAPERS WERE SEIZED WHICH PERTAINED TO THE APPELLANT AND ACCORDINGLY, I T WAS LIABLE TO PROCEEDINGS U/S. 153C OF THE ACT. IN SO FAR AS LAC K OF RECORDED SATISFACTION IS CONCERNED, IT WOULD SUFFICE TO STAT E HERE THAT FROM THE ITA NO.4859/M/09 TO 4865/M/09 8 BODY OF THE ORDER, IT IS QUITE APPARENT THAT THE AO TOOK RECOURSE TO THE PROVISIONS OF SECTION 153C SO AS TO VERIFY THE TRAN SACTION RECORDED THEREIN. IT MUST BE UNDERSTOOD HERE THAT RECORDING OF SATISFACTION SO AS TO SHOW EXISTENCE OF UNDISCLOSED INCOME IS NOT A PRE-REQUISITE UNDER THE PROVISIONS OF SECTION 153C WHICH ARE DIST INGUISHABLE FROM THE PROVISIONS OF SECTION 158BD OF THE ACT WHICH RE LATED TO BLOCK ASSESSMENTS. THE LITERAL MEANING OF SECTION 153C I S THAT ONCE DOCUMENTS ETC. ARE HANDED OVER TO THE AO OF THE OTH ER PERSON, WHICH INCIDENTALLY IS THE SAME AO, THE PROVISIONS OF SECT ION 153A ARE MADE APPLICABLE AND THEREFORE, EVEN IF SUCH ASSETS ETC. ARE RECORDED OR DISCLOSED TO THE DEPARTMENT BY SUCH OTHER PERSON, T HE ASSESSMENT MAY HAVE TO BE FRAMED FOR ALL EVEN ASSESSMENT YEARS . THE OTHER PRECONDITION IS THAT THE OTHER PERSON SHOULD BE THE OWNER OF SUCH ASSETS ETC. WHICH IS NOT DISPUTED AT ALL IN THE PRE SENT CASE BY THE APPELLANT. THE REQUIREMENT OF SECTION 153C WITH RE FERENCE TO SATISFACTION SEEMS TO BE ONLY PRIMA FACIE SATISFACT ION AND NOT A CONCLUSIVE SATISFACTION. THUS THE AO MUST BE PRIMA FACIE SATISFIED THAT THE ASSETS ETC. BELONG TO OTHER PERSON THAN TH E PERSON SEARCHED. FURTHER, THERE IS NOTHING IN THE PROVISIONS TO SHOW THAT SUCH SATISFACTION HAS TO BE RECORDED IN WRITING. MOREOV ER, IN THE PRESENT CASE, SUCH SATISFACTION HAS BEEN STATED TO HAVE BEE N RECORDED AS PER THE REMAND REPORT AND I HAVE NOTHING TO DOUBT THE A CTION OF THE AO IN THIS RESPECT AS IS BEING MADE BY THE APPELLANT. 6.1 IN SO FAR AS THE CONTENTION THAT THE PROCEEDI NGS WERE NOT INTITIATED U/S. 153C BUT U/S. 153A OF THE ACT, I DO NOT FIND ANY MERIT IN IT. IT IS EVIDENT FROM THE BODY OF THE ASSESSME NT ORDER ITSELF THAT THE AO HAS TAKEN RECOURSE TO THE PROVISIONS OF SECTION 153C AND MERELY BY MISTAKE MENTIONING SECTION 153A IN THE NOTICE ISSUE D, WOULD NOT LEAD TO THE CONCLUSION THAT ENTIRE ORDER IS VITIATED. M OREOVER, AS REPORTED IN THE REMAND REPORT SUCH TYPOGRAPHICAL MISTAKE WAS DU LY RECTIFIED IN CONSULTATION WITH ACCOUNTANT OF THE APPELLANT AND S UCH A CONTENTION HAS NOT BE CONTROVERTED BY THE APPELLANT. APART FR OM SUCH FACTS, IT IS RIGHTLY POINTED OUT THAT THE PROVISIONS OF SECTION 292B OF THE ACT TAKE CARE OF SUCH MISTAKE TO WHICH THE PROCEEDINGS COULD NOT BE CONSIDERED INVALID. 6.2 CONSIDERING THE TOTALITY OF FACTS AND CIRCUMS TANCES OF THE CASE AND THE LEGAL POSITION STATED ABOVE, I DO NOT FIND ANY INFIRMITY IN THE ACTION OF THE AO IN ASSUMING JURISDICTION U/S. 153C OF THE ACT AND IN FRAMING THE ASSESSMENT ORDER. THE APPELLANT HAS BE EN ACCORDED ADEQUATE OPPORTUNITY OF HEARING AND ALSO THE ORDER IS NOT TIME BARRED. THE GROUNDS IN THIS RESPECT FAIL. ITA NO.4859/M/09 TO 4865/M/09 9 10. BEFORE US LD. COUNSEL FOR THE ASSESSEE REITERAT ED THE SAME STAND AS WAS PUT FORTH BEFORE THE CIT(A). APART FROM THE AB OVE, HE ALSO MADE SUBMISSION THAT EVEN ASSUMING THAT SATISFACTION WAS RECORDED BY THE ERSTWHILE AO, THE SAME IS NOT PROPER AND WILL NOT C ONFER JURISDICTION FOR THE AO TO PROCEED U/S.153-C OF THE ACT. THE SATISFACTI ON CONTEMPLATED BY THE PROVISION OF SEC.153-C IS REGARDING EXISTENCE OF IN COME OR DOCUMENTS, WHICH WOULD NOT OR HAVE NOT BEEN DISCLOSED TO THE DEPARTM ENT. THE LEARNED COUNSEL FOR THE ASSESSEE IN THIS REGARD POINTED OUT THAT THE ASSESSEE HAS DULY DECLARED INCOME FROM LEASE OF THE PROPERTY RIG HT FROM THE INCEPTION OF THE LEASE IN THE RETURN OF INCOME FILED. THE SAME HAS ALSO BEEN ACCEPTED BY THE REVENUE. THE FACT THAT THE LEASE DEED WAS FOUN D FROM POSSESSION OF A THIRD PARTY IN A SEARCH U/S.132 OF THE ACT, WILL NO T CONFER JURISDICTION TO THE AO TO PROCEED U/S.153-C OF THE ACT, UNLESS THERE IS ATLEAST PRIMA FACIE MATERIAL TO SHOW EXISTENCE OF UNDISCLOSED INCOME. IN THIS REGARD, IT WAS ALSO POINTED OUT THAT U/S.132 OF THE ACT, SEARCH AND SEI ZURE CAN BE EFFECTED ONLY OF DOCUMENTS OR EVIDENCE REGARDING INCOME WHICH HAV E NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED TO THE DEPARTMENT BY AN ASS ESSEE. WHEN THERE IS DISCLOSURE OF RENTAL INCOME RECEIVED UNDER THE LEAS E AGREEMENT PRIOR TO SEARCH BY THE ASSESSEE, THE AO CANNOT ENTERTAIN ANY BELIEF REGARDING EXISTENCE OF ANY INCOME NOT DISCLOSED TO THE DEPART MENT. IF THE AO IS PERMITTED TO DO SO, THEN IT WOULD BE GIVING AO POWE R TO MAKE ROVING ENQUIRIES WITHOUT ANY REFERENCE TO SEIZED MATERIAL WHICH PRIMA FACIE WOULD SHOW EXISTENCE OF UNDISCLOSED INCOME. IN THIS REGA RD THE LEARNED COUNSEL DREW OUR ATTENTION TO SEVERAL DECISIONS, TO WHICH W E WILL MAKE A REFERENCE A LITTLE LATER. THE LEARNED D.R. RELIED ON THE CIT(A ). 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENT IONS. WE WILL FIRST CONSIDER THE PLEA OF THE ASSESSEE REGARDING THE EXI STENCE OF SATISFACTION ON THE PART OF THE ASSESSING OFFICER OF THE PERSON WHO WAS SEARCHED U/S.132 OF THE ACT, TO PROCEED AGAINST THE ASSESSEE (WHO WAS A PERSON WHO WAS NOT ITA NO.4859/M/09 TO 4865/M/09 10 SEARCHED U/.132 OF THE ACT) U/S.153-C OF THE ACT. IN DOING SO WE ARE PRESUME THAT THERE WAS A SATISFACTION NOTE RECORDED BY THE ACIT CC-10 ON 23/3/2007 AND WE ALSO PRESUME THAT THE NOTICE UNDER SECTION 153A DATED 26/3/2007 WAS IN FACT A NOTICE UNDER SECTION 153C A ND THERE WAS A TYPOGRAPHICAL ERROR IN SUCH NOTICE. WE ALSO PRESUM E THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS SECTION 153A WAS CORRECTED A S 153C AFTER DUE CONSENT BY THE ACCOUNTANT OF THE ASSESSEE ( IN THE NOTICES AS WELL AS RETURN FILED BY THE ASSESSEE). WE HOWEVER HASTEN TO ADD T HAT WE ARE NOT GIVING ANY FINDING ON THE CLAIM OF THE REVENUE OR THE ASSESSEE REGARDING EXISTENCE OF SATISFACTION NOTE OR TYPOGRAPHICAL ERROR IN THE NOT ICE U/S.153-A OF THE ACT. 12. THE FIRST ASPECT THAT HAS TO BE CONSIDERED IS AS TO WHETHER ANY SATISFACTION AT ALL IS REQUIRED TO BE ARRIVED AT BY THE AO OF THE PERSON WHO WAS SEARCHED U/S.132 OF THE ACT, REGARDING ANY UNDI SCLOSED INCOME OF THE PERSON WHO WAS NOT SUBJECTED TO A SEARCH TO HAND OV ER THE SEIZED MATERIAL TO THE AO OF THE PERSON TO WHOM THE SEIZED DOCUMENT BE LONGS OR IS ALLEGED TO BELONG. 13. THE ITAT DELHI IN THE CASE OF M/S.JINDAL STAIN LESS STEEL VS. ACIT ITA NO.3480 AND 3481/DEL/2006 IN ITS ORDER DATED 25/4/2 008 HAD DEALT WITH THIS ISSUE AND HAVE HELD THAT PROVISIONS OF SEC.153 -C OF THE ACT ARE AKIN TO SEC.158BD OF THE ACT. (VIDE PARA 46 OF THE ORDER). THE HONBLE TRIBUNAL FURTHER HELD THAT THE AO HAS TO FOLLOW THE CONDITIO N PRECEDENT FOR PROCEEDING U/S.153-C OF THE ACT IN THE SAME MANNER AS THE AO W OULD DO FOR PROCEEDING U/S.158BD OF THE ACT. THE HONBLE TRIBUNAL IN THIS REGARD REFERRED TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F MANISH MAHESHWARI VS. ACIT 289 ITR 341(SC) AND HAVE HELD THAT SATISFA CTION THAT UNDISCLOSED INCOME BELONGS TO THE PERSON OTHER THAN THE ONE WHO IS SEARCHED U/S.132 OF THE ACT, HAS TO BE ARRIVED AT BY THE AO BEFORE PROC EEDING TO HAND OVER SEIZED DOCUMENT TO THE AO OF THE PERSON WHO WAS NOT SEARCH ED. WE THEREFORE HOLD, ITA NO.4859/M/09 TO 4865/M/09 11 FOLLOWING THE DECISION OF THE ITAT DELHI BENCH REFE RRED TO ABOVE, THAT THE AO HAS TO RECORD SATISFACTION REGARDING EXISTENCE OF U NDISCLOSED INCOME BEFORE PROCEEDING U/S.153-C OF THE ACT. 14. THE NEXT ASPECT TO BE EXAMINED IS AS TO WHETHE R SUCH SATISFACTION THAT THERE WAS UNDISCLOSED INCOME OF THE ASSESSEE CAN BE SAID TO HAVE BEEN ARRIVED AT BY THE AO IN THE PRESENT CASE. WE HAVE ALREADY REFERRED TO THE SECTION 153C OF THE ACT. IT WAS THE CONTENTION OF THE LD. D.R THAT SECTION 153C OF THE ACT, WOULD BE APPLICABLE WHENEVER DOCU MENTS SEIZED IN THE COURSE OF A SEARCH BELONG TO A PERSON OTHER THAN A PERSON IN WHOSE CASE A SEARCH IS BEING CONDUCTED. IN THIS REGARD WE FIND THAT THE PROVISIONS OF SECTION 153C HAVE TO BE READ IN THE CONTEXT OF SECT ION 132 OF THE ACT. THE EXERCISE OF THE POWER UNDER S. 132 TO INITIATE A SE ARCH OF A PLACE AND EFFECT SEIZURE IS SUBJECT TO FULFILLMENT OF TWO CONDITIONS (A) EXISTENCE OF INFORMATION IN POSSESSION OF THE AUTHORITY SPECIFIED IN S. 132, AND (B) THEIR BELIEF ON THE BASIS OF SUCH INFORMATION THAT A PERSON TO WHOM SUM MONS IS ISSUED TO PRODUCE BOOKS OF ACCOUNTS AND, OMITS TO PRODUCE SUC H BOOKS OF ACCOUNT OR WILL NOT PRODUCE THEM OR THAT THE PERSON IS IN POSS ESSION OF MONEY, BULLION OR JEWELLERY OR OTHER VALUABLE ARTICLES OR THINGS W HICH HE HAS NOT DISCLOSED OR WOULD NOT DISCLOSE FOR THE PURPOSE OF THE IT ACT, 1 961. FURTHER A SEIZURE OF ONLY DOCUMENTS WHICH WOULD NOT BE PRODUCED BY A PER SON SEARCHED CAN BE MADE. AS FAR AS THE PRESENT CASE IS CONCERNED, WE FIND THAT THE ASSESSEE HAS ENTERED INTO AN AGREEMENT FOR LEASE OF THE PROPERTY UNDER LEASE AGREEMENT DATED 6/8/2000. THE ASSESSEE HAS BEEN DECLARING IN COME FROM LETTING OUT OF THE AFORESAID PROPERTY REGULARLY IN ITS BOOKS OF AC COUNT TILL THE DATE OF SEARCH AND THEREAFTER. THUS THE FACTUM OF THE ASSESSEE RE CEIVING INCOME IN THE FORM OF RENT IS VERY MUCH IN THE KNOWLEDGE OF THE DEPARTMENT. IN FACT THIS FACT HAS BEEN DULY INFORMED BY THE ASSESSEE IN ITS LETTER DATED 22/1/2007 TO THE DDIT (INV.), UNIT 7(2). THE SATISFACTION NOTE UNDER SECTION 153C OF THE ACT MERELY SAYS THAT THE DOCUMENTS WERE BEING SENT TO VERIFY THE ITA NO.4859/M/09 TO 4865/M/09 12 TRANSACTION OF LEASE. ON THE FACTS OF THE CASE I T CANNOT BE SAID THAT THE AO WAS SATISFIED REGARDING EXISTENCE OF ANY UNDISCLOSE D INCOME WHICH WOULD WARRANT INITIATION OF PROCEEDINGS UNDER SECTION 153 C OF THE ACT. IN OUR VIEW THE SATISFACTION REQUIRED FOR PROCEEDINGS UNDER SEC TION 153C CANNOT BE REDUCED TO A MERE FORMALITY OF FORWARDING THE DOCUM ENTS FOUND IN THE COURSE OF SEARCH WHICH DID NOT BELONG TO THE PERSON SEAR CHED AND WHICH BELONGED TO THE PERSON AGAINST WHOM PROCEEDINGS UNDER SECTIO N 153C ARE SOUGHT TO BE INITIATED. IN THE CASE OF ANIL P.KHIMANI VS. DC IT ITA NO.2855 TO 2860/M/08 (ORDER DATED 23.2.2010) THIS TRIBUNAL HAD AN OCCASION TO DEAL WITH SIMILAR ISSUE. THE TRIBUNAL HELD AS FOLLOWS: 13. A PERUSAL OF THE ASSESSMENT ORDERS IN ALL THE SE CASES, CLEARLY DEMONSTRATE THAT THE SOLE ADDITION IN QUESTION IS O N ACCOUNT OF LOW WITHDRAWALS . THIS HAD NOT BEEN MADE, BASED ON ANY MATERIAL FOUND EITHER DURING HE COURSE OF SEARCH OR DURING THE COU RSE OF ASSESSMENT PROCEEDINGS. UNDER THE CIRCUMSTANCES, WE EXAMINE T HE LEGAL POSITION. THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF ANIL KUMAR BHATIA VS. ACIT HELD AS FOLLOWS: S.153 PROVIDES THAT WHERE A SEARCH IS INITIATED U/ S. 132 THE AO SHALL ASSESS OR REASSESS THE TOTAL INCOME OF SIX A SSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RE LEVANT TO THE PREVIOUS YEAR IN WHICH THE SEARCH IS CONDUCTED OR REQUISITION IS MADE. THE FIRST PROVISO STATES THAT THE AO SHALL ASSESS OR REASSESS THE TOTAL INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SUCH SIX ASSESSMENT YEARS WHILE THE SECOND PROVISO STATE THAT THE ASSESSMENT OR REA SSESSMENT RELATING TO THE SAID SIX ASSESSMENT YEARS PENDING ON THE DATE OF INITIATION OF THE SEARCH UNDER SECTION 132 SHALL ABATE . IN THE ASSESSEES CASE, SEARCH ACTION WAS INITIATED AND ASSESSMENT UNDER S. 153A WERE FRAME FOR SIX ASSESSM ENT YEARS MAKING VARIOUS ADDITIONS. THE ASSESSEE CLAIMED THA T THE ADDITIONS WERE NOT TENABLE AS REGULAR RETURNS HAD B EEN FILED WHERE THE PARTICULARS RELATING TO THE ADDITIONS HAD BEEN DISCLOSED AND THE SAME HAD BEEN ACCEPTED U/S. 143( 1) AND ALSO THAT NO MATERIAL HAD BEEN FOUND DURING THE SEARCH T O JUSTIFY THE ADDITIONS. THE REVENUE CLAIMED THAT THE EFFECT OF THE PROVISOS TO S. 153A WAS THAT ALL ASSESSMENTS ABATE AND THERE HA D TO BE A DE NOVO ASSESSMENT IN WHICH THE AO WAS NOT CONFINED TO THE ITA NO.4859/M/09 TO 4865/M/09 13 MATERIAL FOUND DURING THE SEARCH. HELD REJECTING THE CLAIM OF THE REVENUE. (I) S. 153A DOES NOT AUTHORIZE THE MAKING OF A DE NOVO ASSESSMENT. WHILE UNDER THE 1 ST PROVISO, THE AO IS EMPOWERED TO FRAME ASSESSMENT FOR SIX YEARS, UNDER THE 2 ND PROVISO, ONLY THE ASSESSMENTS WHICH ARE PENDING ON THE DATE OF INITIATION OF SEARCH ABATE. THE EFFEC T IS THAT COMPLETE ASSESSMENTS DO NOT ABATE. THERE CAN BE TW O ASSESSMENTS FOR THE SAME ASSESSMENT YEAR. ASSESSME NTS WHICH ARE NOT PENDING BEFORE THE AO ON THE DATE OF SEARCH BUT ARE PENDING BEFORE AN APPELLATE AUTHORITY WILL SURVIVE. (II) AN ASSESSMENT CAN BE SAID TO BE PENDING ONLY IF T HE AO IS STATUTORILY REQUIRED TO DO SOMETHING FURTHER. I F A S. 143(2) NOTICE HAS BEEN ISSUED, THE ASSESSMENT IS PE NDING. HOWEVER, THE ASSESSMENT IN RESPECT OF A RETURN PROC ESSED U/S. 143(1) IS NOT PENDING BECAUSE THE AO IS NOT REQUIRED TO DO ANYTHING FURTHER ABOUT SUCH A RETURN . (III) THE POWER GIVEN BY THE PROVISO TO ASSESS INCOME F OR SIX ASSESSMENT YEARS HAS TO BE CONFINED TO THE UNDISCLO SED INCOME UNEARTHED DURING THE SEARCH AND CANNOT INCL UDE ITEMS WHICH ARE DISCLOSED IN THE ORIGINAL ASSESSMEN T PROCEEDINGS. (IV) ON FACTS, THE RETURNS HAD BEEN PROCESSED U/S. 143(1 ), THE ASSESSMENT WERE NOT PENDING AND AS NO MATERIAL WA S FOUND DURING THE SEARCH, THE ADDITIONS COULD NOT BE SUSTAINED RESPECTFULLY FOLLOWING THE SAME, WE DELETE ALL THE ADDITIONS MADE AND ALLOW THE APPEALS OF THE ASSESSEE. 15. IN THE PRESENT CASE WE ARE OF THE VIEW THAT T HAT THERE WAS NO SATISFACTION REGARDING EXISTENCE OF ANY UNDISCLOSED INCOME WHICH WARRANTS PROCEEDINGS UNDER SECTION 153 OF THE ACT. WE, THER EFORE, HOLD THAT THE NECESSARY SATISFACTION DOES NOT EXIST FOR THE PROCE EDINGS UNDER SECTION 153C OF THE ACT. ON THIS GROUND THE ASSESSMENT IS ANNUL LED. 16. AS FAR AS MERITS OF THE ADDITION MADE BY THE AO ARE CONCERNED THE FACTS ARE THAT THE ASSESSEE HAS BEEN CARRYING ON BU SINESS OF DEALING IN PROPERTY. THE ASSESSEE WAS RECEIVING INCOME FROM S OME OF THE PROPERTIES, ITA NO.4859/M/09 TO 4865/M/09 14 WHICH IT OWNED, AND WHICH WAS LET OUT, AS BUSINESS INCOME. ACCORDING TO THE ASSESSEE, THE PROPERTY WHICH IT OWNED AND WHICH WAS LET OUT WAS PURCHASED IN THE COURSE OF ITS BUSINESS OF DEALING IN PROPERTIES AND THE LETTING WAS TEMPORARY AND WITH THE INTENTION TO REC OVER PART OF THE EXPENSES. THE PROPERTIES LET OUT DID NOT GET GOOD PRICE AND T HEREFORE RETAINED AND LET OUT TEMPORARILY. SINCE THE LETTING WAS INCIDENTAL TO BUSINESS IT WAS CLAIMED THAT INCOME RECEIVED FROM LETTING WAS BUSINESS INCO ME. IN ASSESSMENT YEAR 2001-02 AS WELL AS A.Y 2006-07 THERE WAS INCOME ON SALE OF PROPERTY WHICH WAS DECLARED AS BUSINESS INCOME. THE AO IN THE PRO CEEDINGS UNDER SECTION 153C OF THE ACT, TREATED THE INCOME IN THE FORM OF RENT AS INCOME FROM HOUSE PROPERTY. FURTHER THE AO DISALLOWED SOME OF THE EX PENSES DEBITED IN THE P&L ACCOUNT ON THE GROUND THAT THESE WERE NOT REQUI RED FOR EARNING INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 17. WE HAVE PERUSED THE RECORDS AND FIND THAT THE A SSESSEE HAD THE FOLLOWING INVESTMENTS/STOCK IN TRADE FROM FY 00-01 TO 06-07. S.NO. PARTY NAME AMOUNT TOTAL F.Y. 2000-01 FLATS 1. PINKY BUILDERS PVT. LTD. FLAT NO.902/904 4,031,260 2. ARYSTON DEVELOPERS P. LTD. FLAT AT VINTAGE PEARL CO-OP. HSG. SOCIETY LTD. FLAT NO.401 4,834,750 8,866,010 ADVANCE 1 KARIA BUILDERS 140,000 2. SAQUIB CONSTRUCTIONS 500,000 3. RIZVI LAND DEVELOPMENTS P. LTD 500,000 4. HABIB AKBARALI MEHERALI 600,000 1,740,000 CLOSING BALANCE RS. 10,606,01 0 F.Y. 2001-02 FLATS OPENING BALANCE 8,866,010 LESS: FLAT SOLD DURING THE YEAR 4,031,260 ADD: SHARE APPLICATION MONEY 260 4,835,010 ADVANCE 1 KARIA BUILDERS 140,000 2. SAQUIB CONSTRUCTIONS 500,000 3. RIZVI LAND DEVELOPMENTS P. LTD 500,000 ITA NO.4859/M/09 TO 4865/M/09 15 4. HABIB AKBARALI MEHERALI 600,000 1,740,000 CLOSING BALANCE RS. 6,575,01 0 F.Y. 2002-03 FLATS OPENING BALANCE 4,835,010 4,835,010 ADVANCE 1 KARIA BUILDERS 140,000 2. RIZVI LAND DEVELOPMENTS P. LTD 500,000 3. HABIB AKBARALI MEHERALI 600,000 1,240,000 CLOSING BALA NCE RS. 6,075,01 0 F.Y. 2003-04 FLATS OPENING BLANCE 4,835,010 4,835,010 ADVANCE 1. RIZVI LAND DEVELOPMENT P. LTD 500,000 2. HABIB ADBARALI MEHERALI 600,000 3. BHARTI & CO 100,000 4. OM SHIVAM CONSTRUCTION PVT. LTD. 500,000 5. PADIYA ASSOCIATES 200,000 6. BOMBAY ISLE DEVELOPMENT PVT. LTD. 600,000 2,500,000 CLOSING BALANCE RS.7,335,010 F.Y. 2004-05 FLATS OPENING BLANCE 4,835,010 4,835,010 ADVANCE 1. RIZVI LAND DEVELOPMENT P. LTD 500,000 2. OM SHIVAM CONSTRUCTION PVT. LTD. 500,000 3. PADIYA ASSOCIATES 200,000 4. BOMBAY ISLE DEVELOPMENT PVT. LTD. 600,000 1,800,000 CLOSING BALANCE RS. 6,635,01 0 F.Y. 2005-06 FLATS OPENING BLANCE 4,835,010 4,835,010 ADVANCE 1. OM SHIVAM CONSTRUCTION PVT. LTD. 500,000 2. PADIYA ASSOCIATES 200,000 3. BOMBAY ISLE DEVELOPMENT PVT. LTD. 600,000 1,300,000 CLOSING BALANCE RS. 6,635,01 0 F.Y. 2006-07 FLATS OPENING BLANCE 4,835,010 LESS FLAST SOLD DURING THE YEAR 4,835,010 ADVANCE 1. OM SHIVAM CONSTRUCTION PVT. LTD. 500,000 2. BOMBAY ISLE DEVELOPMENT PVT. LTD. 600,000 1,100,000 CLOSING BALANCE RS. 1,100,00 0 ITA NO.4859/M/09 TO 4865/M/09 16 18. IT CAN BE SEEN FROM THE ABOVE THAT IN A.Y 2001 -02 AND 2006-07 THE ASSESSEE HAD INCOME ON SALE OF PROPERTIES AND IN AL L THE OTHER AYS THE ASSESSEE HAS BEEN GIVING ADVANCE FOR PURCHASE OF PR OPERTIES. THE INCOME FROM SALE OF PROPERTIES IN AY 01-02 AND 06-7 HAS BE EN DECLARED AS BUSINESS INCOME. IN ITS PAPER BOOK FROM PAGE 244 TO 533, TH E ASSESSEE HAS GIVEN A LIST OF THE VARIOUS EFFORTS IT MADE FOR DOING BUSIN ESS OF PURCHASE AND SALE OF PROPERTIES. IT IS THE PLEA OF THE ASSESSEE THAT BU SINESS DID NOT MATERIALSE DUE TO VARIOUS PROBLEMS AND THE ASSESSEE CONTINUED TO CARRY ON ITS BUSINESS AND THE EXPENSES DISALLOWED WERE REQUIRED TO BE INC URRED BY THE ASSESSEE. WE ARE OF THE VIEW THAT IN THE LIGHT OF THE ABOVE D OCUMENTS IT CAN BE SAID THAT THE ASSESSEE DID NOT CEASE TO CARRY ON THE BUS INESS OF PURCHASE AND SALE OF PROPERTIES. THE EXPENSES SOUGHT TO BE DISA LLOWED BY THE AO WERE REQUIRED TO BE INCURRED BY THE ASSESSEE. THEREFORE , NOTWITHSTANDING THE FACT THAT THE RENTAL INCOME IS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY, STILL THE ASSESSEE WOULD BE ENTITLED TO THE DEDUCTION OF THE AFORESAID EXPENSES. THEREFORE, THE IMPUGNED ADDITI ONS DESERVE TO BE DELETED EVEN ON MERITS. IN OUR VIEW, EVEN ON MERITS THE AS SESSEE DESERVES TO SUCCEED. WE, THEREFORE, DIRECT THAT THE IMPUGNED A DDITION BE DELETED. ALL THE APPEALS OF THE ASSESSEE ARE ACCORDINGLY ALLOWED . 19. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 24 TH DAY OF JUNE, 2011. SD/- SD/- (R.K.PANDA ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED. 24 TH JUNE.2011 ITA NO.4859/M/09 TO 4865/M/09 17 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RH BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. ITA NO.4859/M/09 TO 4865/M/09 18 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 14/6/11 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 15/6/11 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER