SHRI SANJAY H PAREEK, Jaipur V. DCIT, Jaipur

ITA 516/JPR/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 47934 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 1998-1999
• Appeal Filed On: 17-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VINOD JOHRI
• Assessee Lawyers: S L PODDAR
• Keywords: Search and seizure; Loose papers; Document seized; Documents seized
• Section: 143(3); 133A; 153A; 147; 148; 132; 139

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO.516/ JP/2010 TO 523/JP/20/2010 ASSESSMENT YEARS: 1998-99 TO 2005-06 PAN : AFUPP 6438 E SHRI SANJAY H PAREEK VS. THE DCIT 115, VARDHMAN, JOHRI BAZAR CENTRAL CIRCLE- 1 JAIPUR JAIPUR (APPELLANT ) (RESPONDENT) ASSESSEE BY : SHRI S.L. PODDAR DEPARTMENT BY :SHRI VINOD JOHRI ORDER PER N.L. KALRA, AM:- THE ASSESSEE HAS FILED THE APPEALS AGAINST RESPECT IVE ORDERS OF THE LD. CIT(A)-CENTRAL, JAIPUR. EXCEPT FOR THE ASSESSMENT Y EAR 2005-06, ALL THE ASSESSMENTS HAVE BEEN MADE U/S 153C READ WITH SECTI ON 153A AND 143(3) OF THE ACT. 2.1 THE FIRST GRIEVANCE OF THE ASSESSEE FOR ALL THE ASSESSMENT YEARS EXCEPT FOR THE ASSESSMENT YEAR 2005-06 IS THAT THE ORDER P ASSED BY THE AO U/S 153A AND 153C OF THE ACT IS BAD IN LAW AND VOID AB INITI O. 2.2 THE ASSESSEE FILED THE RETURN OF INCOME BEFORE THE DCIT, CIRCLE- (1), SURAT BEING PROPRIETOR OF M/S. MINO-O-GEMS , 204, G OPI NATH APARTMENTS, 2 JADA KHADI, MAHENDRAPURA, SURAT. A SEARCH AND SEIZU RE OPERATION WAS CARRIED OUT AT THE RESIDENTIAL AND BUSINESS PREMISE S OF M/S. MITTAL GEMS AND M/S. SANJEEV PRAKASHAN GROUP ON 19-062003 AND AT TH E BUSINESS PREMESIS OF M/S. ANMOL RATAN AND M/S. SHRUTI GEMS AT P-74, BHATTON KI GALI, JAIPUR DURING THESE SEARCH OPERATIONS, CERTAIN INCRIMINATI NG BOOKS OF ACCOUNTS AND DOCUMENTS WERE FOUND AND SEIZED ALONGWITH SALES INV OICES RELATING TO THE ASSESSEE WHICH HAVE BEEN ISSUED BY HIM TO M/S. MITT AL GEMS, JAIPUR. SURVEY U/S 133A OF THE ACT WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE AT 115, VARDHMAN COMPLEX, JOHRI BAZAR, JAIPUR ON 24 -06-203. DURING THE COURSE OF SURVEY AT THE BUSINESS PREMISES OF THE AS SESSEE, CERTAIN LOOSE PAPERS WERE FOUND AND PHOTOSTAT COPY OF SUCH LOOSE PAPERS WERE OBTAINED. NO BOOKS OF ACCOUNTS WERE FOUND BY THE DEPARTMENT D URING THE COURSE OF SURVEY U/S 133A OF THE ACT. SURVEY U/S 133A OF THE ACT WAS ALSO CARRIED OUT AT 302, CHANDRALOK APARTMENT ON 10-07-2003 AS THAT PREMISES WAS STATED TO BE THE HEAD OFFICE OF M/S. MINE-O-GEMS AND M/S. SAH IL DIAMONDS (P) LTD.. SUCH INFORMATION OF HEAD OFFICE WAS GIVEN BY THE AS SESSEE IN HIS STATEMENT RECORDED ON 24-06-2003. HOWEVER, THIS PREMISES WAS FOUND AS LOCKED. THE AO HAS MENTIONED THAT INCRIMINATING PAPERS AND VOUC HERS RELATING TO M/S.MINE-O-GEMS WERE FOUND AT THE BUSINESS/ RESIDEN TIAL PREMISES OF SHRI ANAND SHANKAR MITTAL AND M/S. MITTAL GEMS, JAIPUR D URING THE COURSE OF 3 SEARCH OPERATION AS SUCH THE CASE OF THE ASSESSEE I S COVERED U/S 153C READ WITH SECTION 153A OF THE INCOME TAX ACT, 1961. HENC E, NOTICE U/S 153C READ WITH SECTION 153A OF THE ACT WAS ISSUED TO THE ASSESSEE ON 27-01-2006. 2.3 BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT AC IT, CENTRAL CIRCLE- 1, JAIPUR SHOULD HAVE HANDED OVER THE MATERIAL TO THE AO OF THE ASSESSEE I.E. ITO WARD- 1(7), SURAT. FURTHER EVEN THE TRANSFER OF CASE U/S 127 OF THE ACT WAS WITHOUT APPLICATION OF MIND AND WITHOUT GIVING ANY OPPORTUNITY TO THE ASSESSEE. IT WAS THEREFORE, CONTENDED THAT ORDER PA SSED BY THE ACIT, CENTRAL CIRCLE- 1 DESERVES TO BE QUASHED. IT WAS ALSO CONTE NDED THAT THE ASSESSEE FILED THE RETURN IN FORM NO. 2D WHICH IS NOT CORREC T FORM FOR FILING OF THE RETURN OF INCOME AND HENCE THE RETURN WAS NOT VALID AND THE ORDER PASSED ON THE BASIS OF THAT RETURN IS ALSO NOT VALID. 2.4 THE LD. CIT(A) AFTER CONSIDERING THE CONTENTION S OF THE ASSESSEE HELD THAT THE ORDER PASSED U/S 153C READ WITH SECTION 14 3() AND 144A IS VALID AFTER OBSERVING AS UNDER:- 3.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE A.R, AND HAVE PERUSED THE MATERIAL ON RECORD. IT IS NOTICED THAT AT THE TIME OF FRAMING ASSESSMENT, ACI T, CENTRAL CIRCLE- 1, JAIPUR WAS HAVING VALID JURISDIC TION OVER THE CASE WHICH HAD BEEN TRANSFERRED FROM SURAT TO HIM U/S 127. THIS JURISDICTION WAS NEVER CHALLENGED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEE DINGS. 4 IN RESPONSE TO NOTICE 153C, THE ASSESSEE VIDE HIS L ETTER DATED 8-3-2006 SUBMITTED THAT THE EARLIER RETURN FI LED U/S 139 MAY BE TREATED AS THE RETURN FILED IN RESPONSE TO THE NOTICE U/S 153C. THEREFORE, IT IS SEEN THAT THE ASS ESSEE DID NOT CHALLENGE THE JURISDICTION OF THE AO OVER THE C ASE WHICH WAS VALIDLY TRANSFERRED FROM SURAT TO JAIPUR. AS REGARDS LEGALITY OF ORDER U/S 127 TRANSFERRING HIS CASES FROM SURAT TO JAIPUR, THE SAME CANNOT BE CHALLENGED IN APPEAL BEFORE THE CIT (A) BECAUSE ORDER U/S 127 IS NOT AN APPEALABLE ORDER. THE ONLY REMEDY AVAILABLE TO THE ASSESSEE IN THIS REGARD WAS BY WAY OF FILING WRIT P ETITION BEFORE THE HON'BLE HIGH COURT AGAINST ORDER U/S 127 . THEREFORE, THIS CONTENTION OF THE ASSESSEE ALSO CAN NOT BE ACCEPTED. AS REGARDS FILING OF RETURN IN FORM 2D, O NCE THE ASSESSEE REPLIED TO THE NOTICE U/S 153C, HE CANNOT LATER ON CLAIM THAT VALID RETURN WAS NOT FILED BY HIM AND TH EREFORE, CONSEQUENT PROCEEDING IN PURSUANCE OF THE SAME ARE INVALID. THEREFORE, THE CONTENTION OF THE ASSESSEE IS NOT TENABLE AND IS REJECTED. ACCORDINGLY GROUND NO. 1 I S DISMISSED. 2.5 DURING THE COURSE OF PROCEEDINGS BEFORE US, THE LD. AR DREW OUR ATTENTION TO SECTION 153C OF THE ACT. PROCEEDINGS U /S 153C OF THE ACT CAN BE INITIATED IN CASE ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNTS OR DOCUMENT SEIZED OR RE QUISITIONED BELONGS OR BELONGS TO A PERSON OTHER THAN THE PERSON REFERRED IN SECTION 153A. SEARCH 5 WAS CONDUCTED IN THE CASE OF M/S. SANJEEV PRAKASHAN GROUP AND M/S. MITTAL GEMS, JAIPUR ETC. SALES VOUCHERS ISSUED BY THE ASSE SSEE WERE FOUND IN THE SEARCH PROCEEDINGS OF M/S. SANJEEV PRAKASHAN GROUP AND M/S. MITTAL GEMS, JAIPUR AND SUCH SALES VOUCHERS CANNOT BE SAID TO BE BELONGING TO THE ASSESSEE. AFTER ISSUING SALES BILLS, SUCH SALES BIL LS BECAME THE PROPERTY OF PERSON IN WHOSE FAVOUR THESE WERE ISSUED. IN CASE T HE ENQUIRY PERTAINING TO THE SALES VOUCHERS ISSUED BY THE ASSESSEE RESULTED IN ESCAPEMENT OF INCOME ON THE PART OF THE ASSESSEE THEN THE AO WAS FREE TO TAKE ACTION U/S 148 OF THE ACT. NO PROPER SATISFACTION AS REQUIRED BY THE PROV ISIONS OF SECTION 153C IS MENTIONED. THE LD. AR REFERRED TO THE FOLLOWING DEC ISIONS IN WHICH THE WORD BELONG HAS BEEN EXPLAINED AND DEFINED. 1. ITO VS. SMT. BADHURANI DEEPINDER 262 ITR 403 2. CWT VS. BISHWANATH CHATTERJEE , 103 ITR 36 3. CWT VS. JUGAL KISHORE BHAGAT, 197 ITR 250 THE LD. AR HAS REFERRED TO THE DECISION OF ITAT BAN GALORE BENCH IN THE CASE OF P SRINIVAS NAIK VS. ACIT, 114 TTJ 856 IN WHICH O N THE IDENTICAL GROUNDS IT WAS HELD THAT ACTION U/S 153C IS NOT VALID BECAU SE NO ASSET OR DOCUMENT BELONGING TO THE ASSESSEE WERE SEIZED. 2.6 ON THE OTHER HAND, THE LD. DR HAS ALSO FILED TH E WRITTEN SUBMISSION OF THREE PAGES. THE LD. DR SUBMITTED THAT THE ASSESSE E GAVE THE BOGUS ADDRESS 6 AS THE PREMISES WAS FOUND TO BE CLOSED. NO BOOKS OF ACCOUNTS AND STOCK WERE FOUND DURING THE COURSE OF SURVEY AT THE PREMI SES OF THE ASSESSEE AT JAIPUR . TRANSACTIONS OF PURCHASES ARE ADMITTEDLY B OGUS. CERTAIN VOUCHERS ISSUED BY THE ASSESSEE WERE SEIZED DURING SEARCH. S INCE VOUCHERS WERE ISSUED BY THE ASSESSEE AND THEREFORE, SUCH VOUCHER S BELONG TO THE ASSESSEE. SUCH VOUCHERS WERE ISSUED FROM BILL BOOKS OF THE AS SESSEE AND THEREFORE, ARE PART OF BOOKS OF ACCOUNTS OF THE ASSESSEE. SUCH SAL ES VOUCHERS FOUND DURING THE COURSE OF SEARCH AT THE PREMISES OF OTHER PERSO N WILL ALWAYS REMAIN PART OF THE ASSESSEE'S BOOKS. THE VOUCHERS SEIZED BY THE DEPARTMENT HAVE NOT BEEN DISOWNED BY THE ASSESSEE. THE LD. DR STATED TH AT THE AO COULD HAVE PASSED THE ASSESSMENT ORDER U/S 143(3) READ WITH SE CTION 153A AS SEARCH WARRANT WAS ALSO ISSUED IN THE CASE OF THE ASSESSEE . THE LD. DR FURTHER SUBMITTED THAT THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF VIJAYBHAI N CHANDRANI 2010-TIOL-371-HC-AHM-IT IS NO T APPLICABLE. 2.7 WE HAVE HEARD BOTH THE PARTIES. IT IS NOTICED T HAT SEARCH AND SEIZURE OPERATION AT THE BUSINESS AND RESIDENTIAL PREMISES OF M/S. MITTAL GEMS, JAIPUR AND M/S. SANJEEV PRAKASHAN GROUP WERE CARRIE D OUT ON 19-06-2003. THE SURVEY WAS CONDUCTED AT BUSINESS PREMISES OF TH E ASSESSEE ON 24-06- 2003. NOTICE U/S 153C HAS BEEN ISSUED TO THE ASSESS EE ON 27-01-2006 I.E. AROUND 2 YEARS AFTER THE SEARCH CONDUCTED AT THE PREMISES OF M/S. MITTAL 7 GEMS, JAIPUR AND M/S. SANJEEV PRAKASHAN GROUP. NEIT HER THE AO NOR THE ASSESSEE HAS PLACED COPY OF THE ORDER U/S 127 OF TH E ACT. HOWEVER, IT IS NOTICED THAT THE ASSESSEE HAS FILED THE INCOME TAX RETURN UPTO ASSESSMENT YEAR 2003-04 BEFORE THE AO AT SURAT. THE RETURN FOR THE ASSESSMENT YEAR 2004-05 WAS FILED FOR THE FIRST TIME AT JAIPUR AND THIS HAS BEEN FILED IN THE OFFICE OF ADDL. CIT , RANGE-1, JAIPUR. NOTICE U/S 1 53C HAS BEEN ISSUED BY THE ACIT, CENTRAL CIRCLE- 1, JAIPUR. NOW BEFORE WE PROCEED FURTHER, IT WILL BE USEFUL TO REPRODUCE SECTION 153C OF THE ACT. ASSESSMENT OF INCOME OF ANY OTHER PERSON. 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, BULLION, JEWELLERY OR OTHER 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 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 PROCE ED AGAINST EACH SUCH OTHER PERSON AND ISSUE SUCH OTHER PERSON NOTICE AND ASSESS OR REASSE SS INCOME OF SUCH OTHER PERSON IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A :] [ 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 SECTION 153A SHALL BE CONSTRUED AS REFERENCE TO THE DATE OF REC EIVING THE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS SEIZED OR REQUISI TIONED BY THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON. (2) WHERE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS S EIZED OR REQUISITIONED AS REFERRED TO IN SUB-SECTION (1) HAS OR HAVE BEEN RECEIVED BY THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON AFTER THE DUE DATE FOR FURNI SHING THE RETURN OF INCOME FOR THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH SEARCH IS CONDUCTED UNDER SECTION 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 , 8 BEFORE THE DATE OF RECEIVING THE BOOKS OF ACCOUNT O R DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED BY THE ASSESSING OFFICER HAVING JURIS DICTION OVER SUCH OTHER PERSON, SUCH ASSESSING OFFICER SHALL ISSUE THE NOTICE AND ASSESS OR REASSESS TOTAL INCOME OF SUCH OTHER PERSON OF SUCH ASSESSMENT YEAR IN THE MANNER PROVID ED IN SECTION 153A .] 2.8 IF DURING THE COURSE OF SEARCH ANY MONEY, BULLI ON, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNTS OR D OCUMENTS SEIZED OR REQUISITIONED BELONGS OR BELONG TO A PERSON OTHER T HAN THE PERSON REFERRED TO IN SECTION 153A, THEN THE BOOKS OF ACCOUNTS OR DOCU MENTS 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 NOTICE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A OF THE ACT. FOR INVOKING THE PROVISIONS OF SECTION 153C, THE AO HAVING JURISDICTION OVER A PERSON ON WHICH THE SEARCH AND SEIZURE OPERA TIONS WERE CARRIED OUT IS SATISFIED THAT ASSETS LIKE MONEY, BULLION ETC. OR D OCUMENTS OR DOCUMENTS SEIZED BELONGED TO OTHER PERSON. IT WAS REQUIRED TO DEMONSTRATE THAT THE AO WHO WAS HAVING JURISDICTION OVER M/S. MITTAL GEMS, JAIPUR, M/S. SANJEEV PRAKASHAN GROUP, ANOMOL RATAN AND M/S. SHRUTI GEMS WAS SATISFIED THAT BILLS ISSUED BY THE ASSESSEE BELONGED TO THE ASSESS EE. AFTER COMING TO THE SATISFACTION, THE AO HAVING JURISDICTION OVER SEARC HED PERSONS WAS REQUIRED TO HAND OVER SUCH BOOKS OF ACCOUNTS OR DOCUMENTS TO THE AO WHO WAS HAVING JURISDICTION OVER OTHER PERSONS TO WHOM SUCH BOOKS OF ACCOUNTS OR DOCUMENTS BELONGED. AS PER SECTION 132(9) OF THE AC T, THE AUTHORIZED 9 OFFICER HAVING NO JURISDICTION OVER THE SEARCHED PERSON IS REQUIRED TO HAND OVER THE ASSETS AND BOOKS OF ACCOUNTS TO THE AUTHOR IZED OFFICER WITHIN PERIOD OF SIXTY DAYS FROM THE DATE ON WHICH THE LAST OF TH E AUTHORIZATIONS FOR SEARCH WAS EXECUTED. HENCE, TO DECIDE THE ISSUE AS TO WHET HER THE BILLS ISSUED BY THE ASSESSEE FOUND DURING THE COURSE OF SEARCH OPERATIO N IN THE CASE OF OTHER PERSONS CAN BE MADE A BASIS FOR INVOKING THE PROVIS IONS U/S 153C OF THE ACT. THE SALES BILLS ISSUED BY THE ASSESSEE BECOME THE P ROPERTY OF THE PURCHASER. ACTION U/S 153C CAN BE TAKEN IN CASE THE BOOKS OF A CCOUNTS OR DOCUMENT FOUND IN THE COURSE OF SEARCH OF OTHER PERSONS BELO NGED TO THE ASSESSEE. IN THE INSTANT CASE IT IS UNDISPUTED FACT THAT NO VALU ABLE ASSETS LIKE MONEY, BULLION BELONGING TO THE ASSESSEE WERE FOUND DURING THE COURSE OF SEARCH UNDERTAKEN IN THE CASE OF OTHER PERSONS. THE WORD BELONG HAS BEEN USED IN SECTION 2(M) OF WEALTH TAX ACT. THE NET WEALTH AS P ER SECTION 2(M) OF WEALTH TAX ACT MEANS THE AMOUNT BY WHICH THE AGGREG ATE VALUE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT OF AL L THE ASSETS WHEREVER LOCATED BELONGING TO THE ASSESSEE ON THE VALUATION DATE IS IN EXCESS OF THE AGGREGATE VALUE OF ALL THE DEBTS OWED BY THE ASSESS EE ON THE VALUATION DATE. THE HON'BLE APEX COURT IN THE CASE OF CWT VS. BISHW ANATH CHATTERJEE, 103 ITR 536 HAS CONSIDERED THE MEANING OF WORD BELONG . IT WILL BE USEFUL TO 10 REPRODUCE THE MEANING OF THE WORD BELONG AS INCOR PORATED BY HON'BLE APEX COURT AT PAGE 537 AS UNDER:- THE EXPRESSION 'BELONG' HAS BEEN DEFINED AS FOLLO WS IN THE OXFORD ENGLISH DICTIONARY: 'TO BE THE PROPERTY OR RIGHTFUL POSSESSION OF.' SO IT IS THE PROPERTY OF A PERSON, OR THAT WHICH IS IN HIS POSSESSION AS OF RIGHT, WHICH IS LIABLE TO WEALTH T AX. IN OTHER WORDS, THE LIABILITY TO WEALTH TAX ARISES OUT OF OW NERSHIP OF THE ASSET, AND NOT OTHERWISE. MERE POSSESSION, OR JOINT POSSESSION, UNACCOMPANIED BY THE RIGHT TO, OR OWNERSHIP OF PROP ERTY WOULD THEREFORE NOT BRING THE PROPERTY WITHIN THE DEFINIT ION OF 'NET WEALTH' FOR IT WOULD NOT THEN BE AN ASSET 'BELONGIN G' TO THE ASSESSEE. 2.9 THE WORD BELONG HAS AGAIN BEEN CONSIDERED BY HON'BLE APEX COURT IN THE CASE OF IN THE CASE OF NAWAB SIR MIR OSMAN A LI KHAN VS. CWT,162 ITR 888. AT PAGE 894, THE HON'BLE APEX COURT HAS OB SERVED AS UNDER:- IN THE INSTANT APPEAL, HOWEVER, WE ARE CONCERNED WITH THE EXPRESSION 'BELONGING TO ' AND NOT WITH THE EXP RESSION ' OWNER '. THIS QUESTION HAD COME UP BEFORE THIS COUR T BEFORE A BENCH OF FIVE LEARNED JUDGES IN CWT V. BISHWANATH C HATTERJEE [1976] 103 ITR 536 (SC). AT PAGE 539 OF THE REPORT, THIS COURT REFERRED TO THE DEFINITION OF THE EXPRESSION ' BELO NG?' IN THE OXFORD ENGLISH DICTIONARY, ' TO BE THE PROPERTY OR RIGHTFUL POSSESSION OF '. SO IT IS THE PROPERTY OF A PERSON, OR THAT WHICH IS IN HIS POSSESSION AS OF RIGHT, WHICH IS LIABLE T O WEALTH TAX. IN OTHER WORDS, THE LIABILITY TO WEALTH TAX ARISES BEC AUSE OF THE BELONGING OF THE ASSET, AND NOT OTHERWISE. MERE POS SESSION, OR 11 JOINT POSSESSION, UNACCOMPANIED BY THE RIGHT TO BE IN POSSESSION OR OWNERSHIP OF PROPERTY, WOULD, THEREFO RE, NOT BRING THE PROPERTY WITHIN THE DEFINITION OF ' NET W EALTH ' FOR IT WOULD NOT THEN BE AN ASSET ' BELONGING ' TO THE ASS ESSEE. THE FIRST LIMB OF THE DEFINITION INDICATED IN THE OXFOR D DICTIONARY MAY NOT BE APPLICABLE TO THESE PROPERTIES IN THE IN STANT APPEAL BECAUSE THESE LANDS WERE NOT LEGALLY THE PROPERTIES OF THE VENDEES AND THE ASSESSEE WAS THE LAWFUL OWNER OF TH ESE PROPERTIES. THE VENDEES WERE, HOWEVER, IN RIGHTFUL POSSESSION OF THE PROPERTIES AS AGAINST THE VENDOR IN VIEW OF THE PROVISIONS OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 188 2. THE SCHEME OF THE ACT HAS TO BE BORNE IN MIND. IT HAS A LSO TO BE BORNE IN MIND THAT UNLIKE THE PROVISIONS OF THE INC OME TAX ACT, SECTION 2(M) OF THE W.T. ACT USES THE EXPRESSION ' BELONGING TO ' AND AS SUCH INDICATES SOMETHING OVER WHICH A PERS ON HAS DOMINION AND LAWFUL DOMINION AND HE SHOULD BE THE P ERSON ASSESSABLE TO WEALTH TAX FOR THIS PURPOSE. 2.10 IN THE ABOVE REFERRED JUDGEMENT, THE HON'BLE A PEX COURT HAS ALSO REFERRED TO THE DECISION IN THE CASE OF RAJA MOHAMM AD AMIR AHMED KHAN VS. MUNICIPAL BOARD OF SITAPUR, AIR 1965 SC 1923 IN WHICH IT WAS OBSERVED THAT EXPRESSION BELONGING TO NO DOUBT WA S CAPABLE OF DENOTING AN ABSOLUTE TITLE, IT WAS NEVERTHELESS NOT CONFINED TO CONNOTING THAT SENSE. FULL POSSESSION OF AN INTEREST LESS THAN THAT OF FULL OW NERSHIP COULD ALSO BE 12 SIGNIFIED BY THAT EXPRESSION. IT WILL BE USEFUL TO REPRODUCE THE FOLLOWING PARAGRAPH FROM THE ABOVE REFERRED JUDGEMENT. THE POSITION IS THAT THOUGH ALL STATUTES INCLUDIN G THE STATUTE IN QUESTION SHOULD BE EQUITABLY INTERPRETED , THERE IS NO PLACE FOR EQUITY AS SUCH IN TAXATION LAWS. THE CONC EPT OF REALITY IN IMPLEMENTING A FISCAL PROVISION IS RELEVANT AND THE LEGISLATURE IN THIS CASE HAS NOT SIGNIFICANTLY USED THE EXPRESSION ' OWNER ' BUT USED THE EXPRESSION ' BELONGING TO '. THE PROPERTY IN QUESTION LEGALLY, HOWEVER, CANNOT BE SAID TO BEL ONG TO THE VENDEE. THE VENDEE IS IN RIGHTFUL POSSESSION ONLY A GAINST THE VENDOR. SPEAKING FOR MYSELF, I HAVE DELIBERATED LON G ON THE QUESTION WHETHER IN INTERPRETING THE EXPRESSION 'BE LONGING TO' IN THE ACT, WE SHOULD NOT IMPORT THE MAXIM THAT ' E QUITY LOOKS UPON A THING AS DONE WHICH OUGHT TO HAVE BEEN DONE ' AND THOUGH THE CONVEYANCE HAD NOT BEEN EXECUTED IN FAVO UR OF THE VENDEE, AND THE LEGAL TITLE VESTED WITH THE VENDOR, THE PROPERTY SHOULD BE TREATED AS BELONGING TO THE VENDEE AND NO T TO THE ASSESSEE. I HAD OCCASION TO DISCUSS THOROUGHLY THIS ASPECT OF THE MATTER WITH MY LEARNED BROTHER AND SINCE IN VIEW OF THE POSITION THAT LEGAL TITLE STILL VESTS WITH THE ASSESSEE AND THE AUTHORITIES, WE HAVE NOTED, ARE PREPONDERANTLY IN FAVOUR OF THE VIEW THAT THE PROPERTY SHOULD BE TREATED AS BELONGING TO THE ASSE SSEE IN SUCH CIRCUMSTANCES, I SHALL NOT PERMIT MY DOUBTS TO PREV AIL UPON ME TO TAKE THE VIEW THAT THE PROPERTY BELONGS TO THE V ENDEE AND NOT TO THE ASSESSEE. I AM CONSCIOUS THAT IT WILL WORK S OME AMOUNT OF INJUSTICE IN SUCH A SITUATION BECAUSE THE ASSESSEES WOULD BE 13 MADE LIABLE TO BEAR THE TAX BURDEN IN SUCH SITUATIO NS WITHOUT HAVING THE ENJOYMENT OF THE PROPERTY IN QUESTION. B UT TIMES PERHAPS ARE YET NOT RIPE TO TRANSMUTE EQUITY ON THI S ASPECT IN THE INTERPRETATION OF LAW MUCH AS I WOULD HAVE PERSONAL LY LIKED TO DO THAT. AS BENJAMIN CARDOZO HAS SAID, ' THE JUDGE, EVEN WHEN HE BE FREE, IS NOT WHOLLY FREE '. THE JUDGE CANNOT INNOVATE AT PLEASURE. IT MAY BE SAID THAT THE LEGISLATURE HAVING DESIGNED LY USED THE EXPRESSION ' BELONGING TO ' AND NOT THE EX PRESSION ' OWNED BY ' HAD PERHAPS EXPECTED JUDICIAL STATESMANS HIP IN THE INTERPRETATION OF THIS EXPRESSION AS LEADING TO AN INTERPRETATION THAT IN A SITUATION LIKE THIS, IT SHOULD NOT BE TRE ATED AS BELONGING TO THE ASSESSEE BUT, AS SAID BEFORE, TIMES ARE NOT YET RIPE AND IN SPITE OF SOME HESITATION, I HAVE PERSUADED MYSELF T O COME TO THE CONCLUSION THAT FOR ALL LEGAL PURPOSES, THE PROPERT Y MUST BE TREATED AS BELONGING TO THE ASSESSEE AND PERHAPS TH E LEGISLATURE WOULD REMEDY THE HARDSHIP OF THE ASSESSEE IN SUCH C ASES IF IT WANTS. EVEN THOUGH THE ASSESSEE HAD A MERE HUSK OF TITLE AND AS AGAINST THE VENDEE NO REALITY OF TITLE, AS AGAINST THE WORLD HE WAS STILL THE LEGAL OWNER AND THE REAL OWNER. 2.11 WE HAVE ALSO CONSIDERED THE DECISIONS ON WHICH LD. AR HAS PLACED RELIANCE TO SHOW THAT THE SALES INVOICES ISSUED BY THE ASSESSEE DID NOT BELONG TO HIM. THE ITAT BANGALORE TRIBUNAL IN THE CASE OF P. SRINIVAS NAIK VS. ACIT, (SUPRA) HAS ALSO HELD UNDER SIMILAR CIRCUMST ANCES THAT SECTION 153C 14 CANNOT BE INVOKED ON THE GROUND THAT BOOKS OF ACCOU NTS OR DOCUMENTS SEIZED SHOW THAT OTHER PERSON IS HAVING UNDISCLOSED INCOME UNLESS AND UNTIL SEIZED BOOKS OF ACCOUNTS OR DOCUMENTS BELONG TO THE ASSESS EE. ONE OF US I.E. ACCOUNTANT MEMBER WAS A PARTY TO THE DECISION AT BA NGALORE BENCH. IT WILL BE USEFUL TO REPRODUCE PARA 7 FROM THAT DECISION.. 7. WE HAVE HEARD BOTH THE PARTIES. IT IS AN UNDISPUTE D FACT THAT BOOKS OF ACCOUNT OR DOCUMENT DOES NOT BELONG T O THE ASSESSEE, AS THESE WERE SEIZED FROM THE PREMISES OF SHRI REDDY. IT IS NOWHERE STATED THAT THESE BOOKS OF ACCOUNT OR DOCUMENTS SHO WED THAT ALL THE TRANSACTIONS BELONGING TO THE ASSESSEE. SUCH BOOKS OF ACCOUNT OR DOCUMENTS CONTAINED THE TRANSACTIONS RELATING TO TH E GROUP CONCERNS OF SHRI REDDY. NO VALUABLE BELONGING TO THE ASSESSEE H AS BEEN SEIZED DURING THE COURSE OF SEARCH. THE TERM BELONGING, IM PLIED SOMETHING MORE THAN THE IDEA OF CASUAL ASSOCIATION. IT INVOLV ES THE NOTION OF CONTINUITY AND INDICATES ONE MORE OR LESS INTIMATE CONNECTION WITH THE PERSON OVER A PERIOD OF TIME. THE BOOKS OF ACCOUNT OR DOCUMENTS SEIZED DURING THE COURSE OF SEARCH HAVE A CLOSE ASS OCIATION WITH THE GROUP CONCERN OF SHRI REDDY. IT RECORDS THE TRANSAC TION CARRIED OUT BY THAT GROUP. IT DOES NOT RECORD THE TRANSACTION CARR IED OUT BY THE ASSESSEE. UNDER WEALTH-TAX ACT, ASSETS BELONGING TO ASSESSEE WERE TAXABLE. THE EXPRESSION BELONGING TO THE ASSESSEE C ONNOTES BOTH THE COMPLETE OWNERSHIP AND LIMITED OWNERSHIP OF INTERES T. OF COURSE BELONGING TO IS CAPABLE CONNOTING, INTEREST, WHICH IS LESS THAN ABSOLUTE PERFECT LEGAL TITLE. HOWEVER, THERE SHOULD BE SOME LIMITED OWNERSHIP OF INTEREST, IF IT IS TO BE PERMITTED THAT THE ASSE TS BELONGS TO THE ASSESSEE. IN THE INSTANT CASE, DOCUMENTS OR BOOKS O F ACCOUNT FOUND DURING THE COURSE OF SEARCH AND SEIZED CANNOT BE TERMED, T O BE INDICATING ANY LIMITED INTEREST OF THE OWNERSHIP OF THE ASSESSEE I N SUCH BOOKS OF ACCOUNT 15 OR DOCUMENTS. THE LANGUAGE USED IN SECTION 153C IS MATERIALLY DIFFERENT FROM THE LANGUAGE USED UNDER SECTION 158BD. AS PER SECTION 158BD, IF ANY UNDISCLOSED INCOME RELATES TO OTHER PERSON, THE N ACTION AGAINST SUCH OTHER PERSON CAN BE TAKEN PROVIDED SUCH UNDISCLOSED INCOME IS REFERABLE TO THE DOCUMENT SEIZED DURING THE COURSE OF SEARCH. HOWEVER, SECTION 153C SAYS THAT IF VALUABLE OR BOOKS OF ACCOUNT OR D OCUMENTS BELONGING TO OTHER PERSONS ARE SEIZED THEN ACTION UNDER SECTION 153C CAN BE TAKEN AGAINST THAT PERSON. IN THE INSTANT CASE, WE ARE SA TISFIED THAT BOOKS OF ACCOUNT OR DOCUMENTS DO NOT BELONG TO THE ASSESSEE AND, THEREFORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN INITIATING A CTION UNDER SECTION 153A READ WITH SECTION 153C OF THE INCOME-TAX ACT. THE ASSESSING OFFICER IS FREE TO TAKE PROPER REMEDIAL MEASURE AS PER LAW. 2.12 THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF VIJAYBHAI N CHANDRANI VS. ACIT, CIRCLE- 1 HAS ALSO HELD THAT A CONDITION PRECEDENT FOR ISSUING NOTICE U/S 153C IS THAT THE MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNTS OR D OCUMENT SEIZED OR REQUISITIONED SHOULD BELONG TO SUCH PERSON. IF THE SAID REQUIREMENT IS NOT SATISFIED, RESORT CANNOT BE HAD TO THE PROVISIONS O F SECTION 153C OF THE ACT. IT THEREFORE, APPEARS THAT NOTICE U/S 153C HAS BEEN ISSUED AFTER COMPLETING OF ASSESSMENT IN THE CASES WHERE SEARCH WAS CONDUCTED. THE AO HAVING JURISDICTION OVER SEARCHED PERSON WAS REQUIRED TO R ECORD THE SATISFACTION THAT BOOKS OF ACCOUNTS OR DOCUMENTS BELONGED TO OTHER PE RSONS AND SUCH SATISFACTION SHOULD HAVE BEEN RECORDED BEFORE THE C OMPLETION OF THE ASSESSMENT ON THE SEARCHED PERSON. LOOKING TO THE ABOVE DISCUSSIONS, WE 16 HOLD THAT THE AO WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 153C OF THE ACT. THE ASSESSMENT PASSED U/S 153C REA D WITH SECTION 143(3) ARE QUASHED FOR ALL THE ASSESSMENT YEAR EXCEPT ASSE SSMENT YEAR 2005-06. SINCE WE HAVE QUASHED THE ASSESSMENT ORDER, THEREFO RE, OTHER GROUNDS OF APPEALS ARE NOT BEING DISPOSED OFF. 3.1 NOW WE TAKE UP THE APPEAL FOR THE ASSESSMENT YE AR 2005-06 WHERE THE ASSESSMENT FOR ASSESSMENT YEAR 2005-06 HAS BEEN MAD E U/S 143(3) OF THE ACT. 3.2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEF ORE THE AO, THE ASSESSEE HAS NEITHER PRODUCED THE BOOKS OF ACCOUNTS NOR ANY DETAILS WERE FURNISHED. THE LD. AR OF THE ASSESSEE STATED THAT T HE ASSESSEE IS IN MUMBAI. HE IS EMPLOYED SOMEWHERE AND GETTING SALARY RS. 5,0 00/- PER MONTH. THE BOOKS OF ACCOUNT ARE WITH THE ASSESSEE. THE AO HAS MENTIONED THAT THE ASSESSEE HAS DECLARED TURNOVER OF RS. 92.80 CRORES AND HAS SHOWN GROSS PROFIT OF 0.33%. THE AO HAS MENTIONED THAT THE ASSE SSEE HAS CREDITED INTEREST OF RS. 21,83,873/- AND SUCH INTEREST HAS B EEN RECEIVED ON THE DELAYED PAYMENTS FROM THE DEBTORS. THE CAPITAL OF THE ASSES SEE IS ONLY RS. 2,46,501/-. THE AO ON THE BASIS OF PAST HISTORY OF THE CASE HELD THAT THE ASSESSEE IS AN ENTRY PROVIDER AND HIS COMMISSION IN COME IS DETERMINED AT 17 0.1%. ACCORDINGLY THE ASSESSMENT HAS BEEN MADE AT A N INCOME OF RS. 31,11,894/-. 3.3 THE LD. CIT(A) MENTIONED THAT INCOME HAS BEEN E STIMATED AT 0.5% OF THE TOTAL TURNOVER IN THE EARLIER ASSESSMENT YEAR . ACCORDINGLY THE LD. CIT(A) DETERMINED THE INCOME OF THE ASSESSEE AT RS. 46,40, 106/-. 3.4 WE HAVE HEARD BOTH THE PARTIES. IT HAS BEEN NOT ICED IN MANY OF THE CASES THAT PARTIES ISSUING BOGUS BILLS WERE EARNIN G COMMISSION VARYING FROM 0.2% TO 0.3%. SUCH PARTIES HAVE ALSO ADMITTED THAT THEY ARE ALSO PAYING COMMISSION TO THE PARTIES FROM WHOM PURCHASE BILLS ARE PROCURED. IT IS THE FINDING OF THE REVENUE THAT IN EARLIER YEARS AS WEL L AS IN THIS YEAR THE ASSESSEE IS AN ENTRY PROVIDER AND WAS ISSUING BOGUS BILLS. I T IS ALSO UNDISPUTED THAT THE ASSESSEE HAS NOT PRODUCED THE BOOKS OF ACCOUNTS BEF ORE THE AO. HENCE, PROVISIONS OF SECTION 145(3) ARE TO BE APPLIED TO FIND OUT THE INCOME UNDER THE HEAD INCOME FROM BUSINESS. CONSIDERING THE FACT THAT THE ASSESSEE BEING AN ENTRY PROVIDER WAS ALSO REQUIRED TO OBTAIN BOGUS BILLS AND THEREFORE, IT WILL BE FAIR AND REASONABLE TO ESTIMATE THE INCOME FROM BUSINESS BY TREATING THE NET COMMISSION AS 0.20 PAISE PER RUPEES ONE HUN DRED. THUS THE INCOME IS TO BE ESTIMATED AT RS. 18,56,042/- AS AGAINST RS. 6 8,28,979/- ESTIMATED BY THE AO AND INCLUDED INTEREST INCOME AS INTEREST INCOME HAS NOT BEEN SEPARATELY ASSESSED UNDER INCOME FROM OTHER SOURCES. 18 4. IN THE RESULT, THE APPEALS OF THE ASSESSEE FOR T HE ASSESSMENT YEAR 1998- 99 TO 2004-05 ARE ALLOWED AND APPEAL FOR THE ASSESS MENT YEAR 2005-06 IS PARTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 24-06 -2011. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 24/06/2011 *MISHRA COPY FORWARDED TO :- 1. SHRI SANJAY H PAREEK, JAIPUR , 2. THE DCIT, CENTRAL CIRCLE- 1,JAIPUR 3. THE LD. CIT BY ORDER 4. THE LD. CIT(A) 5. THE LD.DR 6. THE GUARD FILE (ITA NO516 TO 523./JP/10) A.R, ITAT, JAIPUR 19 20 21