Validity of assessment under section 153C if there is Non-recording of satisfaction by AO of searched person

Short Overview:

As AO of searched person had not recorded the satisfaction that document seized did not belong to searched party but belonged to other person, i.e, assessee, therefore, issuance of notice under section 153C to assessee had to be considered as illegal and accordingly, resultant assessment was set aside.

AO based on documents found during search in case of certain party initiated proceedings under section 153C in assessee’s case and made addition. Assessee challenged this on the ground of non-recording of satisfaction by AO of searched person.

It is held that, Before a notice under section 153C can be issued, two steps are to be taken. The first step is that AO of the person who is searched must arrive at satisfaction that document seized from him does not belong to him but to some other person. It is only in the second step that the document is to be handed over to AO of the persons to whom the seized document ‘belongs’. In the instant case, AO of searched person had not recorded the satisfaction that document seized did not belong to searched party but belonged to other person, i.e., assessee, therefore, first step itself had not been fulfilled for issuing notice under section 153C and accordingly, issuance of notice under section 153C to assessee had to be considered as illegal and accordingly, resultant assessment was set aside.

Decision: In assessee’s favour.

Relied: Pepsi Food (P) Ltd. v. ACIT (2014) 367 ITR 112 (Del) : 2014 TaxPub(DT) 3687 (Del-HC), Pepsico India Holdings (P) Ltd. v. ACIT & Anr. (2015) 370 ITR 295 (Del) : 2014 TaxPub(DT) 3925 (Del-HC).

IN THE ITAT, DELHI BENCH

H.S. SIDHU, J.M. & T.S. KAPOOR, A.M.

ACIT v. Gulshan Kumar Sethi

I.T.A. No. 5220/DEL/2015

18 April, 2019

Assessee by: C.S. Anand, Advocate

Revenue by: Pramita M. Biswas, Commissioner (DR)

H.S. Sidhu, J.M.

The Revenue has filed this Appeal against the impugned Order, dt. 12-6-2015 of the learned Commissioner (Appeals)-19, New Delhi relevant to assessment year 2012-13.

2. The grounds raised in the Revenue’s Appeal read as under :–

1. The order of the learned Commissioner (Appeals) is bad in law and not inconsonance with the facts of the case.

2. The learned Commissioner (Appeals) failed to appreciate the efforts of the assessing officer of the searched party by holding the notice under section 153C of the Act as illegal under the circumstances that the assessing officer of the searched party recorded his satisfaction on the basis of the statement of Sri Sabbineni Surendera a main person of the M/s. Coastal Projects group, that the seized documents belong to the assessee, Sh. Gulshan Kumar Sethi.

3. The learned Commissioner (Appeals) erred in holding the notice under section 153C as invalid merely on the submissions and evidences furnished by the assessee during the course of appellate proceedings many of them being in the nature of additional evidence/argument and not affording opportunity to the assessing officer by way of seeking remand report from her.

4. The learned Commissioner (Appeals) erred in deciding the appeal by not stepping into the shoes of the assessee Officer by not requisitioning records of the searched party from Hyderabad.

5. The learned Commissioner (Appeals) erred in deleting the addition of Rs. 6,45,00,000 by ignoring the fact that the person making the payment had admitted for the same and also offered the income for taxation purpose.

6. The learned Commissioner (Appeals) erred in allowing relief to the assessee on the ground that the assessee ceased to be the Director of the company M/s. Humming Birds Solution (P) Ltd. with effect from 16-3-2007 whereas he was the key person as per seized document to negotiate the deal for transfer of company and also the name of other director were not disclosed at the time of negotiations. The learned Commissioner (Appeals) should have taken cognizance of “substantive” or “beneficial” ownership, being that of the assessee.

3. The brief facts of the case are that assessee filed the return of income for the assessment year 2012-13 on 13-3-2013 at a total income of Rs. 20,72,270. As per the assessment order, there was a search on 25-11-2011 at the premises of M/s. Coastal Projects Ltd. and certain documents relating to the appellant were seized. Based on the above documents, DCIT, Central Circle-4, Hyderabad on 07-1-2014 recorded his satisfaction that sheets numbered 18-19 in Annexure A/CPL/01 belonged to the assessee and requested the assessing officer of the assessee to issue notice under section 153C of the Income Tax Act, 1961 (in short “Act”) to the assessee from assessment year 2006-07 to assessment year 2012-13. Accordingly, the assessing officer initiated proceedings under section 153C of the Act read with section 153A of the Act on 14-3-2014. The assessee filed another return for assessment year 2012-13 in compliance of the above notice on 18-11-2004 showing the same income of Rs. 20,72,270. Subsequently, the file was transferred to ACIT, Circle- 59(1) and the assessment was completed on 31-3-2015 under section 153C of the Act read with section 153A of the Act after adding Rs. 6,45,00,000 under section 56 of the Act as assessee’s undisclosed income on the basis of letter dated 17-3-2015 received from the DCIT, Central Circle-2(2), Hyderabad intimating that Sh. Sabbineni Surendra has admitted that a payment of Rs. 6.45 crores was made to Sh. Gulshan Kumar and completed the assessment at Rs. 6,65,72,270 vide Order, dt. 30-3-2015 under section 153C read with section 153A of the Act. Against the assessment order, the assessee filed the appeal before the learned Commissioner (Appeals) who vide his impugned Order, dt. 26-11-2015 has allowed the appeal of the assessee by deleting the addition of Rs. 6.45 Crores. Aggrieved with the order of the learned Commissioner (Appeals)-19, New Delhi the Revenue is in appeal before the Tribunal.

4. Learned Departmental Representative relied upon the Order of the assessing officer. She stated that order of the learned Commissioner (Appeals) is bad in law and not inconsonance with the facts of the case, because he failed to appreciate the efforts of the assessing officer of the searched party by holding the notice under section 153C of the Act as illegal under the circumstances that the assessing officer of the searched party recorded his satisfaction on the basis of the statement of Sri Sabbineni Surendera, a main person of the M/s. Coastal Projects group, that the seized documents belong to the assessee, Sh. Gulshan Kumar Sethi. She further stated that learned Commissioner (Appeals) wrongly observed that the notice under section 153C is invalid merely on the submissions and evidences furnished by the assessee during the course of appellate proceedings and even many of them being in the nature of additional evidence/argument and not affording opportunity to the assessing officer by way of seeking remand report from her. It was further submitted that learned Commissioner (Appeals) wrongly deleted the addition of Rs. 6,45,00,000 by ignoring the fact that the person making the payment had admitted for the same and also offered the income for taxation purpose and learned Commissioner (Appeals) also erred in allowing relief to the assessee on the ground that the assessee ceased to be the Director of the company M/s. Humming Birds Solution (P) Ltd. with effect from 16-3-2007 whereas he was the key person as per seized document to negotiate the deal for transfer of company and also the name of other director were not disclosed at the time of negotiations. However, learned Commissioner (Appeals) should have taken cognizance of “substantive” or “beneficial” ownership, being that of the assessee, which he had not done.

5. On the other hand, learned counsel for the assessee has relied upon the order of the learned Commissioner (Appeals) and stated that he has passed a well reasoned order which does not need any interference. However, in support of his contention, he filed a copy of Synopsis which is reproduced as under :–

1. The DCIT, Central Circle-4 Hyderabad had issued a letter dt. 7-1-2014 (EXHIBIT- 1) to the ITO, Ward-36(2) New Delhi, intimating him that during the course of search & seizure operation carried out on 25-11-2011 under section 132 in group cases of M/s. Coastal Projects Limited, the documents vide Annexure A/CPL/01 was seized. The DCIT, Central Circle-4 Hyderabad had mentioned that (i) as per the sheets numbered as 18-19 of the above annexure, he is satisfied that these papers belong to Sh. Gulshan Kumar; (ii) he has been directed to handover a copy of the said seized material to the jurisdictional assessing officer of Sh. Gulshan Kumar for assessing or reassessing the income of Sh. Gulshan Kumar in accordance with the provisions of section 153A; and (iii) the assessee office is requested to issue notices under section 153C to Sh. Gulshan Kumar for assessment year 2006-07 to assessment year 2012- 13 and complete the assessment.

2. A perusal of page 18 (EXHIBIT-2) revealed that it is a note prepared by one- Mr. Dharmendra'(which is signed by someone else for & on behalf of the said Mr. Dharmendra) on 06-5-2011 regarding his discussions with the owner of Plot no. C-l, Sector-65, and the same was forwarded to someone else with the concluding remark “Submitted for further advice please”.

(Note: This document do not bear the signature of Sh. Gulshan Kumar Sethi).

3. A perusal of page 19 (EXHIBIT-3) revealed that this sheet is prepared by someone regarding proposed purchase of Plot no. C-l, Sector-65, and the Same was forwarded to someone else with the concluding remark “for the kind information of MD”.

(Note: This document do not bear the signature of Sh. Gulshan Kumar Sethi).

4. The ITO, Ward- 36(2) New Delhi had mechanically recorded his satisfaction on 10-10-2014 (EXHIBIT- 4), while stating that he is satisfied that proceedings under section 153C of the Income Tax Act, 1961 are required to be initiated. Thereafter, the ITO, Ward- 36(2) New Delhi had issued notices under section 153C for assessment year 2006-07 to assessment year 2012- 13.

5. Ultimately the ACIT, Circie-59(1) New Delhi had passed the assessment order under section 153C read with section 153A or. 31-3-2015, thereby making addition in the hands of the assessee at Rs. 6,45,00,000 represented the value of Plot no. C-l. Sector-65, as found mentioned on page 19.

6. On appeal before the learned Commissioner (Appeals), the assessee had challenged the initiation of proceedings under section 153C on the ground that the assessing officer of the searched person has not recorded his satisfaction that those documents do not belong to the searched person. For such proposition, the assessee had placed reliance upon the decisions of Hon’ble Delhi High Court in the cases Pepsi Foods (P) Ltd. v. ACIT (2014) 367 ITR 112 (Del) : 2014 TaxPub(DT) 3687 (Del-HC) and Pepsico India Holdings (P) Ltd. v. ACIT (2015) 370 ITR 295 (Del) : 2014 TaxPub(DT) 3925 (Del-HC).

7. After carefully examining the facts of the case, the case made out by the ACIT, Circle-59(1) New Delhi vide assessment order in the light of the seized documents forwarded by the assessing officer of the searched person and the assessee’s submissions in the light of the decisions relied upon by the assessee, the learned Commissioner (Appeals) had categorically recorded his finding that “the assessing officer of the search company namely DCIT, Central Circle-4 Hyderabad, in the Satisfaction Note had not stated that the seized material do not belong to the searched person”.

8. The assessee had also challenged the addition of Rs. 6,45,00,000 on factual grounds, by pointing out that the Plot no. C-l, Sector-65, Noida was never owned by him. On specific query raised by the learned Commissioner (Appeals) regarding ownership of the said plot, the assessee had informed that the said plot was-owned by Humming Birds Software Private Limited, whose directors were Sandeep Malik & Veena Malik. The assessee had also clarified that he had ceased to be the Director of this company with effect from 15-3-2007. On specific directions of the learned Commissioner (Appeals), the assessee had made available certain documents which were already available on the public domain viz; ROC & IT department.

9. After carefully examining the facts of the case, the case made out by the ACIT, Circle-59(1) New Delhi vide assessment order in the light of the seized documents forwarded by the assessing officer of the searched person and the assessee’s submissions, the learned Commissioner (Appeals) had categorically recorded his finding that (i) the ACIT, Circle- 59(1) New Delhi had made addition of Rs. 6,45,00,000 in the hands of the assessee merely on the presumption that it was the assessee who had received the entire consideration of Rs. 6,45,00,000 without bringing on record any evidence to support her such presumption; (ii) the ACIT, Circle-59(1) New Delhi had not even bothered to verify as to who had been paid Rs. 70,00,000 through cheque; and (iii) on verifying the assessment records maintained by the ACIT, Circle-59(1) New Delhi, he had noticed that there is no evidence whatsoever indicating that Guishan Kumar Sethi had received Rs. 6,45,00,000.

(Note: The learned Commissioner (Appeals) had called for the assessment record to himself verify the documents lighting on the assessment folder as to whether there is any evidence showing receipt of Rs. 6,45,00,000 by Guishan Kumar Sethi.)

5.1 In support of aforesaid contention mentioned in the synopsis, learned counsel for the assessee has relied upon the following case laws, by filing the copies thereof.

(a) Hon’ble Delhi High Court decision in the case of Pepsi Foods (P) Ltd. v. ACIT (2014) 367 ITR 112 (Del) : 2014 TaxPub(DT) 3687 (Del-HC)

(b) Hon’ble Delhi High Court decision in the case of Pepsico India Holdings (P) Ltd. v. ACIT and Another (2015) 370 ITR 295 (Del) : 2014 TaxPub(DT) 3925 (Del-HC)

(c) Hon’ble Delhi High Court decision in the case of Canyon Financial Services Ltd. v. ITO (2017) 399 ITR 202 (Del) : 2017 TaxPub(DT) 1901 (Del-HC)

(d) Hon’ble Delhi High Court decision in the case of CIT v. (1) Renu Constructions (P) Ltd. (ITA No. 499 of 2011); (2) Ankit Gupta (ITA Nos. 32 and 35 of 2012); and(3) Ankit Gupta, L/H Manoj Kumar (ITA Nos. 41 and 125 of 2017) vide Order, dt. 6-9-2017 (2017) 399 ITR 262 (Del) : 2017 TaxPub(DT) 4877 (Del-HC)

6. We have heard both the parties and perused the records, especially the impugned order passed by the learned Commissioner (Appeals), Written Synopsis and the case laws filed by the Assessee’s counsel. We find that learned Commissioner (Appeals) has elaborately discussed the issues in dispute i.e. legal as well as on merits vide para no. 5 to 11 at page nos. 4 to 11 of the impugned order passed by the learned Commissioner (Appeals). For the sake of clarity, we are reproducing hereunder the said relevant findings of the learned Commissioner (Appeals).

“5. Ground Nos. 1 & 2 are against the initiation of proceedings under section 153C which as per the appellant is not in accordance with law and therefore, the assessment completed on 31-3-2015 needs to be set aside. During the appellate proceedings, the appellant’s Authorised Representative challenged the assumption of jurisdiction by the assessing officer before issuing notice under section 153C of Income Tax Act. In this regard, the appellant’s Authorised Representative relied on the Jurisdictional High Court’s decision in the case of M/s. Pepsico India Holdings (P) Ltd. reported in (2015) 370 ITR 295 (Del) : 2014 TaxPub(DT) 3925 (Del-HC), wherein it was held that unless it was first established that the seized documents do not belong to the person in respect of whom search was conducted, the provisions under section 153C on any other person cannot be validly invoked. As per the appellant’s Authorised Representative, the assessing officer of the search Company namely DCIT, Central Circle-4, Hyderabad in the satisfaction note had failed to state that the seized documents namely, sheets numbered 18 & 19 in Annexure A/CPL/01 do not belonged to his assessee M/s. Coastal Projects Ltd. on whom the search was conducted on 25-11-2011. In support of this contention, the appellant filed the copy of the satisfaction note of DCIT, Central Circle-4, Hyderabad, dated 7-1-2014. The relevant portion of the above satisfaction note is as follows :–

“To

The Income Tax Officer,

Ward 36(2),

New Delhi.

Sub: Search & seizure operations in the Group cases of M/s. Coastal Projects Ltd.–Documents relating to other Persons under section 153 C–Forwarding of–regarding–Search operations under section 132 of the Income Tax Act, 1961 were conducted in the group cases of M/s. Coastal Projects Ltd. on 25-11-2011. During these operations, the documents vide Annexure A/CPL/01 were seized from the business premises of M/s. Coastal Projects (P) Ltd. as per Panchanama dated 25-11-2011. On verification of the sheet numbered as 18-19 of the above annexure. I am satisfied that these papers belongs to the following person in accordance with the provisions of section 153C of the Income Tax Act, 1961.

Name & Address Permanent Account Number

Shri Gulshan Kumar AASPS1248Q

S/o. G. C. Sethi A-12,

Swasthya Vihar,

New Delhi–92.

2. I have been directed to hand over a copy of above seized material to the Jurisdictional assessing officer as above for assessing or re-assessing the income of the above person in accordance with the provisions of section 153A. Hence the same is forwarded to you. A copy of the relevant portion of the Appraisal Report is also forwarded for necessary action at your end.

3. The assessing officer is requested to issue notices under section 153C in the above case for assessment year assessment year 2006-07 to 2012-13 and complete the assessment. It is further requested to note that the Time Barring date for completion of assessment 131-3-2015. Yours faithfully,

Sd

(B. KURMINAIDU)

Deputy Commissioner

Central Circle-4, Hyderabad. “

Enel: As above.

6. As per the appellant’s Authorised Representative, the assessing officer of the searched Company only stated that he was satisfied that sheet numbered 18-19 of the Annexure A/CPL/01 belonged to the appellant but failed to mention that these papers do not belong to the search Company namely M/s. Coastal Projects Ltd. The appellant’s Authorised Representative also mentioned Jurisdictional High Court’s decision in the case of Pepsi Food (P) Ltd. reported in (2014) 367 ITR 112 (Del) : 2014 TaxPub(DT) 3687 (Del-HC), wherein it was held that before a notice under section 153C can be issued two steps are to be taken. The first step is that the assessing officer of the person who is searched must arrive at satisfaction that a document seized from him does not belong to him but to some other person. It is only in the second step that the document is to be handed over to the assessing officer of the person to whom the seized document ‘belongs’. In the above decision, the Hon’ble Jurisdictional High Court had stated that the normal presumption is that the document found during the search belongs to the person on whom the search was conducted. Therefore, it is for the assessing officer of the searched person to rebut that presumption and come to a conclusion or ‘satisfaction’ that the document in fact belongs to somebody else. Thus, according to the appellant’s Authorised Representative, in the case of the appellant, the assessing officer of the searched person had not rebutted the presumption that the seized documents 18-19 belonged to M/s. Coastal Projects Ltd. Therefore, as per the appellant’s Authorised Representative, in light of the above decision of the Jurisdictional High Court, the first step itself had not been fulfilled and thus, the issue of notice under section 153C on the appellant is illegal. According to the appellant’s Authorised Representative, in the subsequent decision of the Hon’ble Jurisdictional High Court in the case of Pepsico India Holdings (P) Ltd.mentioned earlier, it was clearly held that unless and until it is established that documents seized do not belong to searched person, the provisions of section 153C do not get attracted. The relevant portion of the above decision of Pepsico India Holdings (P) Ltd. reported in (2014) 367 ITR 112 (Del) : 2014 TaxPub(DT) 3687 (Del-HC) is as follows:–

“Unless and until it is established that the documents do not be Ions to the searched person, the provisions of section 153C of the said Act do not set attracted because the very expression used in section 153C of the said Act is that “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 In view of this phrase, it is necessary that before the provisions of section 153C of the said Act can be invoked, the assessing officer of the searched person must be satisfied that the seized material (which includes documents) does not belongs to the person referred to in section 153A (i.e., the searched person).

7. Since the Jurisdictional High Court’s decision mentioned above is in favour of the appellant, as the assessing officer of the search Company namely DCIT, Central Circle-4, Hyderabad, in the Satisfaction Note had not stated that the seized material do not belong to the searched person. I am constrained to decide the issue in favour of the appellant. Based on the above decision of the Jurisdictional High Court, the issue of notice under section 153C to the appellant had to be considered as illegal and as a result, Ground Nos. 1 & 2 of the appellant are allowed.

8. Ground Nos. 3 & 4 are against the addition of Rs. 6,45,00,000 as undisclosed income. As per the assessment order, the appellant had sold property bearing No. C-l, Sector -65, Noida, to M/s. Coastal Projects Ltd. As per the appellant, he never owned the above property but the property belonged to M/s. Humming Birds Solution (P) Ltd. and the property continues to belong to the same Company. The appellant had filed a copy of the e-filed income tax return of the above Company for assessment year 2010-11 and as per the same, the Company’s Permanent Account Number is AABCH8051J and assessed by ITO, Ward 12(4), Delhi. Copy of the seized document No. 18 mentions the name of the Company differently as M/s. Birds Software (P) Ltd. and the relevant portion is as follows :–

“Name of the Company: Birds Software (P) Ltd.–The sale procedure shall be through Company transfer in the name of the buyer as happened in previous transaction.”

9. Therefore, it appears that it was a transfer of Company and not the transfer of the property as stated by the assessing officer in the assessment order. The assessment order is also silent regarding the date of the transfer or about any document indicating the transfer of the above property. The assessment order mentions that sale consideration was paid by cheque and also by cash. But there is no mention about the date of the cheque or about the recipient of cheque for Rs. 70,00,000. The assessing officer had completed the assessment on the presumption that the appellant is the owner of the property based on the seized documents No. 18, which mentions as follows:- “Owner’s name is Mr. Gulshan. The names of other Directors of the said Company shall be known later. “

10. Therefore, it appears that the appellant Sh. Gulshan was one of the Directors and there is no mention in the assessment order about the other Directors of the Company which proposed to sell property to M/s. Coastral Project (P) Ltd. The appellant’s Authorised Representative during the appellate proceedings stated that the appellant ceased to be the Director of the above Company M/s. Humming Birds Solution (P) Ltd. with effect from 16-3-2007. The appellant also filed a copy of Form No. 32 filed before the Registrar of companies indicating that he had resigned as a Director of the above Company from 15-3-2007.

The audited Balance Sheet of the above Company M/s. Humming Birds Solution (P) Ltd. for the year ending 31-3-2010 filed before me indicates the names of the Directors as Sandeep Malik and Veena Malik, but the assessing officer is either not aware of these Directors or even if aware, had not carried out any enquiries on their sources of income. It appears that the assessing officer presumed that the appellant had received the entire consideration of Rs. 6,45,00,000, though the seized document only indicates that there was some negotiations for the sale of property bearing No. Sector- 65, Noida and there is no indication in it of any definite transaction. There is no mention in the assessment order about the date of sale or any detail regarding the sale transaction. The seized document also indicates the possibility of M/s. Coastal Projects Ltd. acquiring the Company M/s. Humming Birds Solution (P) Ltd. which had the property at C-l, Sector-65, Noida. Since it is clearly mentioned in the assessment order that Rs. 70,00,000 of the consideration was paid by cheque, the assessing officer should have at least traced this cheque payment. If there was evidence that the cheque of Rs. 70,00,000 was received by the appellant Sh. Gulshan Kumar Sethi, then there was some basis for considering that the appellant had received the entire sale consideration of Rs. 6,45,00,000 for transferring the property either through a sale deed or through the outright transfer of the shares of the Company. In the absence of any such concrete evidence, the addition of Rs. 6,45,00,000 on the appellant is based only on assumptions and thus, not sustainable.

11. As per the assessment order, Sh. Subbineni Surendra of M/s. Coastal Projects Ltd. had admitted the payment of Rs. 6,45,00,000 to Sh. Gulshan Kumar as per letter dated 17-3-2015 of DCIT, Central Circle 2(2), Hyderabad. I have verified the assessment records and there is nothing in the above letter dated 17-3-2015 to indicate that the appellant had received Rs. 6,45,00,000 from M/s. Coastal Projects Ltd.. The assessing officer had failed to carry out any enquiries to find out the actual recipient/recipients of Rs. 6,45,00,000 from M/s. Coastal Projects Ltd. before adding the above sum as appellant’s undisclosed income. In the absence of any concrete evidence, to indicate that the appellant had received the sum of Rs. 6,45,00,000 from M/s. Coastal Projects Ltd., I am constrained to delete the addition of Rs. 6,45,00,000 made by the assessing officer on mere presumption.

Thus, Ground Nos. 3 & 4 are allowed.”

6.1 After perusing the aforesaid findings of the learned Commissioner (Appeals), we find that assessing officer of the searched Company only stated that he was satisfied that sheet numbered 18-19 of the Annexure A/CPL/01 belonged to the assessee but failed to mention that these papers do not belong to the search Company namely M/s. Coastal Projects Ltd. We further find that the Hon’ble Jurisdictional High Court decision in the case of Pepsi Food (P) Ltd. v. ACIT reported in (2014) 367 ITR 112 (Del) : 2014 TaxPub(DT) 3687 (Del-HC), has held that before a notice under section 153C of the Act can be issued two steps are to be taken. The first step is that the assessing officer of the person who is searched must arrive at satisfaction that a document seized from him does not belong to him but to some other person. It is only in the second step that the document is to be handed over to the assessing officer of the person to whom the seized document ‘belongs’. In the above decision, the Hon’ble Jurisdictional High Court had stated that the normal presumption is that the document found during the search belongs to the person on whom the search was conducted. Therefore, it is for the assessing officer of the searched person to rebut that presumption and come to a conclusion or ‘satisfaction’ that the document in fact belongs to somebody else. Thus, in the case of the assessee, the assessing officer of the searched person had not rebutted the presumption that the seized documents 18-19 belonged to M/s. Coastal Projects Ltd. Therefore, in light of the above decision of the Jurisdictional High Court, the first step itself had not been fulfilled and thus, the issue of notice under section 153C of the Act on the assessee is illegal. We further note that the Hon’ble Jurisdictional High Court in the case of Pepsico India Holdings (P) Ltd. v. ACIT & Anr. reported in (2015) 370 ITR 295 (Del) : 2014 TaxPub(DT) 3925 (Del-HC), has held that unless and until it is established that documents seized do not belong to searched person, the provisions of section 153C of the Act do not get attracted. The relevant portion of the above decision of Pepsico India Holdings (P) Ltd. (supra) is as follows:- “Unless and until it is established that the documents do not belongs to the searched person, the provisions of section 153C of the said Act do not set attracted because the very expression used in section 153C of the said Act is that “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…” In view of this phrase, it is necessary that before the provisions of section 153C of the said Act can be invoked, the assessing officer of the searched person must be satisfied that the seized material (which includes documents) does not belongs to the person referred to in section 153A (i.e., the searched person). Since the Hon’ble Jurisdictional High Court decisions mentioned above is in favour of the assessee, the assessing officer of the search Company namely DCIT, Central Circle-4, Hyderabad, in the Satisfaction Note had not stated that the seized material do not belong to the searched person. Therefore, based on the above decisions of the Hon’ble Jurisdictional High Court, the issue of notice under section 153C of the Act to the assessee had to be considered as illegal and as a result, learned Commissioner (Appeals) has rightly allowed the legal grounds raised by the assessee, hence, we do not find any infirmity in the action of the learned Commissioner (Appeals), therefore, we uphold the action of the learned Commissioner (Appeals) on the legal issues and dismissed the legal grounds raised by the Revenue.

6.2 As regards merits of the case i.e. deletion of addition of Rs. 6,45,00,000 as undisclosed income is concerned, we note that as per the assessment order, the assessee had sold property bearing No. C-l, Sector -65, Noida, to M/s. Coastal Projects Ltd. The Assessee’s counsel submitted before the learned Commissioner (Appeals) that assessee had never owned the above property but the above property continues to belong to the same company. The assessee had filed a copy of the e-filed income tax return of the above Company for assessment year 2010-11 and as per the same, the Company’s Permanent Account Number is AABCH8051J and assessed by ITO, Ward 12(4), Delhi. Copy of the seized document No. 18 mentions the name of the Company differently as M/s. Birds Software (P) Ltd. and the relevant portion is as follows :–

“Name of the Company: Birds Software (P) Ltd.–The sale procedure shall be through Company transfer in the name of the buyer as happened in previous transaction.”

6.3 After perusing the aforesaid details, it reveals that it was a transfer of Company and not the transfer of the property as stated by the assessing officer in the assessment order. The assessment order is also silent regarding the date of the transfer or about any document indicating the transfer of the above property. The assessment order mentions that sale consideration was paid by cheque and also by cash. But there is no mention about the date of the cheque or about the recipient of cheque for Rs. 70,00,000. The assessing officer had completed the assessment on the presumption that the assessee is the owner of the property based on the seized documents No. 18, which mentions as follows:- “Owner’s name is Mr. Gulshan. The names of other Directors of the said Company shall be known later.”

6.4 After perusing the aforesaid details, it is observed that the assessee Sh. Gulshan was one of the Directors and there is no mention in the assessment order about the other Directors of the Company which proposed to sell property to M/s. Coastral Project (P) Ltd. However, during the appellate proceedings, the Authrorised Representative of the assessee stated that the assessee ceased to be the Director of the above Company M/s. Humming Birds Solution (P) Ltd. with effect from 16-3-2007. The assessee also filed a copy of Form No. 32 filed before the Registrar of companies indicating that he had resigned as a Director of the above Company from 15-3-2007. The audited Balance Sheet of the above Company M/s. Humming Birds Solution (P) Ltd. for the year ending 31-3-2010 filed before the learned Commissioner (Appeals) which indicates the names of the Directors as Sandeep Malik and Veena Malik, but the assessing officer is either not aware of these Directors or even if aware, had not carried out any enquiries on their sources of income. It appears that the assessing officer presumed that the assessee had received the entire consideration of Rs. 6,45,00,000, though the seized document only indicates that there was some negotiations for the sale of property bearing No. Sector-65, Noida and there is no indication in it of any definite transaction. There is no mention in the assessment order about the date of sale or any detail regarding the sale transaction. The seized document also indicates the possibility of M/s. Coastal Projects Ltd. acquiring the Company M/s. Humming Birds Solution (P) Ltd. which had the property at C-l, Sector-65, Noida. Since it is clearly mentioned in the assessment order that Rs. 70,00,000 of the consideration was paid by cheque, the assessing officer should have at least traced this cheque payment. If there was evidence that the cheque of Rs. 70,00,000 was received by the assessee Sh. Gulshan Kumar Sethi, then there was some basis for considering that the assessee had received the entire sale consideration of Rs. 6,45,00,000 for transferring the property either through a sale deed or through the outright transfer of the shares of the Company. In the absence of any such concrete evidence, the addition of Rs. 6,45,00,000 on the assessee is based only on assumptions and thus, not sustainable. Also as per the assessment order, Sh. Subbineni Surendra of M/s. Coastal Projects Ltd. had admitted the payment of Rs. 6,45,00,000 to Sh. Gulshan Kumar as per letter dated 17-3-2015 of DCIT, Central Circle 2(2), Hyderabad, which the learned Commissioner (Appeals) has verified with the assessment records and there is nothing in the above letter dated 17-3-2015 to indicate that the assessee had received Rs. 6,45,00,000 from M/s. Coastal Projects Ltd.. Even the assessing officer had failed to carry out any enquiries to find out the actual recipient/recipients of Rs. 6,45,00,000 from M/s. Coastal Projects Ltd. before adding the above sum as assessee’s undisclosed income. In the absence of any concrete evidence, to indicate that the assessee had received the sum of Rs. 6,45,00,000 from M/s. Coastal Projects Ltd., learned Commissioner (Appeals) has rightly deleted the addition of Rs. 6,45,00,000 made by the assessing officer, which does not need any interference on our part, hence, we uphold the order of the learned Commissioner (Appeals) on this issue and dismiss the ground raised on the merits of the case.

7. In the result, the Revenue’s Appeal stands dismissed