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Assessment under section 153C when Documents seized not belonging to the assessee
Decision : In assessee’s favour.
Relied: CIT v. M/s. Arpit Land (P) Ltd. 78 taxmann.com 300 (Bombay): 2017 TaxPub(DT) 0465 (Bom-HC), and Avkash Land Realty (P) Ltd. & Ors. v. DCIT, ITA No. 8237/Mum/2011 and others, dt. 22-3-2013.
Referred: CIT v. Vijaybhai N. Chandrani (2013) 357 ITR 713 (SC) : 2013 TaxPub(DT) 2196 (SC),Vinod Solanki v. UOI & Anr. 2008 (16) SCC 537 : 2009 TaxPub(CL) 0332 (SC),CIT v. M/s. Lavanya Land (P) Ltd. , Income Tax Appeal No. 72 of 2014 and others, dt. 23-6-2017 : 2017 TaxPub(DT) 1954 (Bom-HC),CIT v. Sinhgad Technical Education Society (2015) 378 ITR 84 (Bom) : 2015 TaxPub(DT) 1464 (Bom-HC),Vijaybhai N. Chandrani v. Asstt. CIT (2011) 333 ITR 436 (Guj) : 2011 TaxPub(DT) 0202 (Guj-HC),Malik Bros. (P.) Ltd. v. CIT (2007) 162 Taxman 43 (Del) : 2007 TaxPub(DT) 1176 (Del-HC),Harsha Land (P) Ltd. v. ITO, ITA No. 5666/Mum/2015, dt. 8-11-2017, and Hiralal Maganlal & Co. v. Dy. CIT (2005) 96 ITD 113 (Mum) : (2005) 97 TTJ (Mum) 377 : 2005 TaxPub(DT) 0657 (Mum-Trib).
IN THE ITAT, PUNE BENCH
SUSHMA CHOWLA, J.M. & D. KARUNAKARA RAO, A.M.
Ekdanta Land (P) Ltd. v. ITO
ITA No. 1400/PUN/2015
17 October, 2018
Appellant by: Pramod Shingte
Respondent by: Shabana Parveen
- Karunakara Rao, A.M.
This appeal is filed by the assessee against the order of Commissioner (Appeals)-2, Thane, dated 25-3-2015 for the assessment year 2009-10.
- Grounds raised by the assessee read as under :–
- On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in rejecting the appellant’s contention that initiation of proceedings under section 153C of the Income Tax Act, 1961 (‘the Act’) are bad-in-law even though no assessment or re-assessment proceedings in relation to this year were pending as on the date of the search under section 132 of the act.
- On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in rejecting the appellant’s contention that invoking of provisions of section 153C of the Act was bad-in-law in view of the fact that there was no money, bullion, jewellery or other valuable articles or things or books of account or documents seized which are belonging or belonged to the appellant and which disclosed that the appellant had incurred unaccounted expenditure.
- On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in confirming the addition on account of alleged unexplained expenditure in lands under section 69C of the Act, ignoring the explanation of seized material and appellant’s reliance of various decisions. It is prayed that the addition on account of alleged unexplained expenditure of Rs. 3,83,79,300 may be deleted.
- On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in bringing new evidences of Pathik Construction and Shri Sunil Gulati on record and discussing the same in the appellate order even though the same has no connection with the facts of the appellant. The learned assessing officer has also made no reference of these evidences while reaching its conclusion in the assessment order. These evidences are, therefore, irrelevant and out of context so far as the appellant is concerned. It is prayed that these evidences may kindly be ignored.
- On the facts in the circumstances of the case and in law, the Hon’ble Commissioner (Appeals) erred in relying on the decision of Hon’ble Delhi High Court in the case of Malik Bros. (P) Ltd. v. CIT (2007) 162 Taxman 43 (Del) : 2007 TaxPub(DT) 1176 (Del-HC). In the appellant’s case, none of the land owners from whom land has been purchased by the appellant confirmed the receipt of cash payment. These remarks of the Hon’ble Commissioner (Appeals) are erroneous remarks. It is therefore prayed that these erroneous remarks of the Hon’ble Commissioner (Appeals) may kindly be deleted.
- On the facts in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in confirming the charge of interest under section 234B and 234C of the Act, having regard to the facts of the case. The appellant denies it liability for payment of interest under section 234B & 234C of the Act.
- Each one of the above grounds of appeal is without prejudice to each other.
- Briefly stated relevant facts include that the assessee is a company engaged in the business of land deals. Assessee filed the original return of income on 21-9-2009 declaring total income of Rs. 7,300. There was search and seizure action under section 132 of the Act in the Jai Corp Group of companies, its employees and close associates. Shri Dilip Dherai is one such person covered in the search and he was incharge of the land acquisition on behalf of the 62 other companies. The search resulted in seizure of various incriminating evidences/documents/loose papers etc.
The seized documents reveal the details relating to land transactions in the 62 companies and the assessee is one among them. The documents indicate the unaccounted cash payments for acquisition of lands.
Statement of Shri Dilip Dherai was recorded and confronted with the various documents seized from the premises. Statement of Shri Anand Jain (main person of Jai Corp Group) was also recorded. Assessing officer found that the contents of the said loose papers are recorded in the books of accounts of the assessee except the transactions mentioned in column ‘cash payment’.
Shri Dilip Dherai agreed about the cash payments and retracted lateron by stating that the statement recorded was under pressure and coercion.
At the end of the assessment proceedings, the assessing officer invoked the provisions of section 69C of the Act and made addition of Rs. 3.84 crores (rounded off) as unexplained expenditure.
- In the First Appellate proceedings, the Commissioner (Appeals) confirmed the addition made by the assessing officer. While coming to the above conclusion, the Commissioner (Appeals) relied on the decision of Mumbai in the case of Hiralal Maganlal & Co. v. DCIT reported in (2005)96 ITD 113 (Mum) : (2005) 97 TTJ (Mum) 377 : 2005 TaxPub(DT) 0657 (Mum-Trib).
- Aggrieved with the order of Commissioner (Appeals), the assessee filed the present appeal with the grounds mentioned above.
- Before us, on the said addition, learned Counsel for the assessee submitted that the assessee is one of the aggregators of land for Jai Corp. Ltd. M/s. Jai Corp. Ltd. has a project of establishing a SEZ. During the search action, the seized documents indicating the cash payments in connection with the said purchase of the lands were discovered. Shri Dilip Dherai, who is a Director of Jai Corp Ltd. gave a statement offering the said cash payments as undisclosed income of Jai Corp. Ltd. Subsequently, the statement was retracted. As per the said documents, Rs. 45 crores was paid to land aggregators, which, inturn, was paid in cash to the land owners by the land aggregators. Assessees share works out to 12% of the same. In all these 62 cases, the assessments were made under section 153C of the Act making similar additions and the matters reached to the Tribunal. Explaining the fate of the additions in those cases, learned Counsel for the assessee mentioned that the Tribunal decided the issue in favour of the assessees on technical grounds.
- In support of his case, learned Counsel for the assessee filed the favourable decisions in respect of other land aggregators and the same are given below :–
- CIT v. M/s. Arpit Land (P) Ltd. 78 taxmann.com300 (Bombay) : 2017 TaxPub(DT) 0465 (Bom-HC)
- M/s. Avkash Land Reality Pvt. Ltd. v. DCIT and others in ITA No. 8237/Mum/2011 and others decided on 22-3-2013
- CIT v. M/s. Lavanya Land Pvt. Ltd. and others, Income Tax Appeal No. 72 of 2014 and others, dt. 23-6-2017 : 2017 TaxPub(DT) 1954 (Bom-HC)
- Harsha Land Private Limited v. ITO, ITA No. 5666/Mum/2015 decided on 8-11-2017.
Learned Counsel submitted that in the case of CIT v. M/s. Arpit Land Pvt. Ltd., the Hon’ble Bombay High Court granted relief on technical grounds. SLP stands dismissed by the Hon’ble Supreme Court. The relief was granted to the assessee stating that the said seized document did “not belong” to that assessee. Before us, learned Counsel for the assessee submitted that the SLP proceedings before the Hon’ble Supreme Court in the case of M/s. Arpit Land Pvt. Ltd., M/s. Lavanya Land Pvt. Ltd. and Harsha Land Private Limited (supra) are uniformly decided in favour of the assessee. It is held that the documents so seized by the Revenue cannot be held to be “belonging” to the assessees. Therefore, the relief stands granted to the assessees on technical grounds. Further, learned Counsel submitted that the Mumbai Bench of the Tribunal in the case of Harsha Land Private Limited (supra) passed a speaking order discussing the ratios of the judgments cited above. Learned Counsel also relied heavily on the Bombay High Court judgment in the case of M/s. Avkash Land Reality Pvt. Ltd. v. DCIT and others as well as in the case of CIT v. M/s. Ambit Realty Pvt. Ltd., wherein the SLP filed by the Department before the Hon’ble Supreme Court are dismissed. Learned Counsel finally submitted that the additions made in the assessment on the basis of said loose papers are not sustainable on the technical grounds.
- Per Contra, learned DR for the Revenue relied heavily on the Supreme Court judgment in the case of Vinod Solanki v. Union of India 2008 (16) SCC 537 : 2009 TaxPub(CL) 0332 (SC) for the proposition that the ‘merely because a statement is retracted, it cannot be treated that the first statement was involuntary or unlawfully obtained. It is only for the maker of the statement who alleges inducement, threat, promise etc. to establish that such improper means has been adopted’. Learned DR prayed for confirming the order of Commissioner (Appeals).
- We heard both the parties on the technical issue of “belongingness” of the seized papers and making of additions based on such papers if they are sustainable or not. Ground No. 2 of the appeal is relevant. Further, we find that it is an admitted fact that the assessee is part of the whole group of 62 land aggregators for Jai Corp Ltd. and assessee’s name appears in the seized document. Further also we find that the jurisdictional High Court as well as Supreme Court in the cases M/s. Avkash Land Reality Pvt. Ltd. v. DCIT and others and in the case of CIT v. M/s. Ambit Realty Pvt. Ltd., held that such documents cannot be said belonging to the assessee and the said judgments was given on the similar facts.
9.1 We find the Hon’ble Jurisdictional High Court in the case of CIT v. M/s. Lavanya Land Pvt. Ltd. and others (supra) approved the finding given by the Tribunal and it is in favour of the assessee. For the sake of convenience, we proceed to extract the relevant paragraphs from the said judgment and the same read as under :–
“19. We are not impressed by the arguments of the learned Additional Solicitor General. The Tribunal has decided, as is apparent from the record, the Appeals of the assessee pertaining to the assessment years 2007-08, 2008-09 and 2009-10. These Appeals were directed against the order of the learned Commissioner (Appeals) dated 27-10-2011. The representatives of both sides, by consent, stated that there are 67 appeals pertaining to 52 different assessees, including the one before the Tribunal, which have been decided on identical facts. The issues are also common.
That is how the Tribunal clubbed all the appeals together for the convenience sake.
- The Tribunal noted the grounds of Appeal. It also noted the facts pertaining to the search and seizure action under section 132 and the statement of Dilip Dherai. The Tribunal noted the fact that the entire land acquisition was looked after by Central Leadership Team of which Mr. Dilip Dherai, Mr. Anand Jain, Mr. Sankay Pnkhia and Mr. Ajit Warthy are key members. The Tribunal also referred to the seized documents. The Tribunal then referred to the order passed by the Commissioner (Appeals). Then the Tribunal noted the arguments of both sides. These arguments were noted in great details. Then, the Tribunal, in paragraph 18 and 19, held as under :–
Thereafter, in paragraph 20, the Tribunal considered the merits and once again, at great length. The particular argument revolving around the statement of Dilip Dherai and his answer to question No. 24 was also considered in paragraph 21 of the impugned order. Then, in paragraph 22, the Tribunal refers to the additions made under section 69C. After reproducing section 69C and adverting to the fact that Dilip Dherai has retracted his statement, the Tribunal arrived at the conclusion that merely on the strength of the alleged admission in the statement of Dilip Dherai, the additions could not have been made. The concurrent findings of fact would demonstrate that the essential ingredients of section 69C of the Income Tax Act enabling the additions were not satisfied. This is not a case of ‘no explanation’. Rather, the Tribunal concluded that the allegations made by the authorities are not supported by actual cash passing hands. The entire decision is based on the seized documents and no material has been referred which would conclusively show that huge amounts revealed from the seized documents are transferred from one side to another. In that regard, the Tribunal found that the Revenue did not bring on record a single statement of the vendors of the land in different villages. None of the sellers has been examined to substantiate the claim of the Revenue that extra cash has actually changed hands. It is in these circumstances that the Tribunal found that on both counts, namely, the legal issue, as also merits, the additions cannot be sustained. Eventually, the Tribunal held in paragraph 25 (page 188) as under :–
- We do not think that this case is any different from the one considered by the Division Bench in the case of M/s. Arpit Land Pvt. Ltd., and M/s. Ambit Reality Pvt. Ltd. The assessment year in the case of M/s. Arpit Land Pvt. Ltd. was 2008-09 and in the case of M/s. Ambit Reality Pvt. Ltd., it was 2007-08. The controversy was identical. The Division Bench, having concluded that no substantial question of law arises for consideration in the Appeals by the Revenue in the case of identical land transactions of two assessees involved in Income Tax Appeal Nos. 83 of 2014 and 150 of 2014, then, a different conclusion is not possible. We do not think that the shift in the stand of the Revenue carries its case any further. We are of the opinion that the Revenue has rightly been faulted for its approach by the Tribunal. The above are pure findings of fact and consistent with the material placed on record. Thus, the jurisdiction and vesting in the assessing officer could have been exercised and the satisfaction in that regard was enough, are not matters which can be decided in the further appellate jurisdiction of this Court. It is not possible for us to re-appraise and reappreciate the factual findings. The finding that section 153C was not attracted and its invocation was bad in law is not based just on an interpretation of section 153C but after holding that the ingredients of the same were not satisfied in the present case. That is an exercise carried out by the Tribunal as a last fact finding authority. Therefore, the finding is a mixed one. There is no substantial question of law arising from such an order and which alternatively considers the merits of the case as well.
- As a result of the above conclusion, we cannot agree with the learned Additional Solicitor General that we can pass a different order and entertain these Appeals for the current year of the search, namely, the assessment year 2009-10. That was based on the argument that the action under section 153C for this year is an incorrect conclusion. All the earlier orders in these Appeals having being noted by us, we have no hesitation in concluding that despite sufficient opportunity being given to the Revenue, it has not been able to satisfy this Court that a different view can be taken.
- As a result of the above discussion, and when it is conceded that all these Appeals involve identical issue and challenge, we proceed to dismiss them but without any orders as costs.”
9.2 We also find the Hon’ble Bombay High Court in the case of CIT v. Arpit Land Pvt. Ltd., as well as in the case of M/s. Ambit Reality Pvt. Ltd., dt. 7-2-2017 (supra) decided the issue in favour of the assessee. For the sake of completeness, we proceed to extract the relevant paras from the said judgment :–
“6. We note that in terms of section 153C of the Act at the relevant time, i.e., prior to 1-6-2015 the proceedings under section 153C of the Act could only be initiated/proceeded against a party — assessee if the document seized during the search and seizure proceedings of another person belonged to the party — assessee concerned. The impugned order records a finding of fact that the seized documents which formed the basis of initiation of proceedings against the respondent assessee do not belong to it.
This finding of fact has not been shown to us to be incorrect. Further, the impugned order placed reliance upon a decision of Gujarat High Court in the Vijaybhai Chandrani v. ACIT (2011) 333 ITR 436 (Guj) : 2011 TaxPub(DT) 0202 (Guj-HC) which records that the condition precedent for issuing notice under section 153C of the Act is that the document found during search proceedings should belong to assessee to whom notice is issued under section 153C of the Act. It was fairly pointed out to us by Mr. Mistry, the learned Senior Counsel for the respondent-assessee that the above decision was reversed by the Supreme Court in CIT v. Vijaybhai N. Chandrani (2013) 357 ITR 713 (SC) : 2013 TaxPub(DT) 2196 (SC). However, we find that the Apex Court reversed the view of Gujarat High Court on the ground that efficacious alternative remedy was available to the petitioner to raise its objections before the authorities under the Act. Therefore, the Gujarat High Court should not have exercised its extra ordinary writ jurisdiction to entertain the petition. However, the Apex Court also clarified that it was not expressing any opinion of the correctness or otherwise of construction placed by the High Court on section 153C of the Act. The Revenue has not pointed out any reason why the construction put on section 153C of the Act by Gujarat High Court is not correct/appropriate. We find that in any case our Court has also taken a similar view in CIT v. Sinhgad Technical Education Society (2015) 378 ITR 84 (Bom) : 2015 TaxPub(DT) 1464 (Bom-HC) and refused to entertain Revenue’s appeal.
- The grievance of Revenue as submitted by Mr. Kotangle is a submission made on the basis of suspicion and not on the basis of any evidence on record which would indicate that the respondent-assessee and persons searched were all part of the same group. Be that as it may, the requirement of section 153C of the Act cannot be ignored at the alter of suspicion. The Revenue has to strictly comply with section 153C of the Act. We are of the view that non satisfaction of the condition precedent viz., the seized document must belong to the respondent-assessee is a jurisdictional issue and non satisfaction thereof would make the entire proceedings taken thereunder null and void. The issue of section 69C of the Act can only arise for consideration if the proceedings under section 153C of the Act are upheld. Therefore, in the present facts, the issue of section 69C of the Act is academic.
- In view of the above reasons and particularly the finding of fact that seized document which forms the basis of the present proceedings, do not belong to the petitioner and the same not being shown to be perverse, the question as raised does not give rise to any substantial question of law and thus not entertained.”
From the above judgments, it is a settled issue that the seized papers seized from the premises of Jai Corp Group and others cannot be relied upon for making additions in the hands of the land aggregators whose names appeared in the said documents. It is not the case of the Revenue that the judgments/decisions delivered in the cases of appeals involving M/s. Arpit Land Pvt. Ltd., M/s. Lavanya Land Pvt. Ltd. and Harsha Land Private Limited (supra) etc. do not relate to such land aggregators. These names also appeared in the said seized papers along with the name of the assessee. On similar facts, the Hon’ble Jurisdictional High Court in the case of CIT v. Arpit Land Pvt. Ltd., as well as in the case of M/s. Ambit Reality Pvt. Ltd., held that the said seized documents cannot be held to be belonging to the assessee. Considering the above binding decisions of Hon’ble High Court as well as Hon’ble Apex Court, we are of the opinion that the ground No. 2 raised by the assessee is to be allowed on technical grounds.
- Since we have allowed the Ground No. 2 in favour of the assessee, in our view, adjudication of Ground Nos. 1 and 3 to 5 becomes an academic exercise. Therefore, the said grounds are dismissed as academic. Ground No. 6 being consequential and Ground No. 7 being general in nature are dismissed, as general/consequential, as the case may be.
- In the result, appeal of the assessee is partly allowed.