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 ITO vs. Vikram A. Pradhan (ITAT Mumbai)

Asstt.Commissioner of Income Tax, Central Circle-7, New Delhi. Vs M/s Amrapali Grand, C-56/40, Sector-62, Noida- U.P.
November, 25th 2015
                IN THE INCOME TAX APPELLATE TRIBUNAL
                    DELHI BENCH `A' NEW DELHI

     BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER
                             AND
         SHRI L.P. SAHU, ACCOUNTANT MEMBER

                          I.T.A.No.6205/Del/2013
                         Assessment Year : 2009-10


Asstt.Commissioner of Income Tax,      vs M/s Amrapali Grand,
Central Circle-7, New Delhi.              C-56/40, Sector-62,
                                           Noida- U.P.
                                          (AAMFA2157N)

                          C.O.No. 150/Del/2014
                        ( IN I.T.A.No.6205/Del/2013)
                          Assessment Year : 2009-10
M/s Amrapali Grand,              vs        ACIT, CC-7,
Noida- U.P.                                 New Delhi.
(Appellant)                                (Respondent)
                       Appellant by: Shri Ramesh Chander, CIT DR
                      Respondent by : Shri Amit Goel & Saurabh Goel
                               Date of Hearing: 28.8.2015
                       Date of pronouncement: 23.11.2015
                               ORDER

PER CHANDRAMOHAN GARG, J.M.

      This appeal of the revenue as well as C.O. of the assessee have been

preferred against the order of the CIT(A)-I, New Delhi dated 18.9.2013 passed

in Appeal No. 93/13-14 for assessment year 2009-10.


2.    Briefly stated the facts giving rise to this appeal are that a search and

seizure operation was conducted on 9.9.2010 in Amrapali Group of cases.
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

Subsequently, a notice u/s 153C of the Act was issued on 12.4.12 to the present

assessee and in response to which the assessee filed a letter stating that the

return declaring income of Rs. 1,01,96,580 filed on 30.09.2009 may be treated

as filed in response to the said notice. Further, notice u/s 142(1) along with

questionnaire on 8.2.2012 and 7.9.2012 and another notice u/s 143(2) of the Act

was issued on 7.9.12.       The Assessing Officer vide assessment order dated

18.3.2013 assessed taxable income of the assessee by making two additions viz.

first addition on account of bogus purchases and second addition on account of

notional interest disallowed from expenditure claimed by the assessee under the

head of interest on term loan. The assessee preferred an appeal before the

CIT(A) agitating the validity of notice u/s 153C of the Act as well as on merit

agitating the additions made by the assessee. The CIT(A) granted relief to the

assessee on both the grounds on merit and deleted both the said additions.

However, the first appellate authority dismissed the legal ground of the assessee

upholding the validity of notice u/s 153C of the Act as within valid jurisdiction

of the Assessing Officer. Now, the revenue is before this Tribunal agitating the

order of the CIT(A) which granted relief to the assessee on both the counts but

the assessee has also filed cross objections challenging the conclusion of the

CIT(A) which uphold the validity of action and notice u/s 153C of the Act.




                                        2
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

C.O. No.150/Del/14

3.     At the very outset, both the parties are agreed that the C.O. of the

assessee being legal may be considered and heard first.        We have heard

arguments of both the sides and carefully perused the relevant material placed

on record. Ld. AR submitted that on the fact and circumstances of the case and

in law, notice u/s 153 of the Act issued to the assessee was illegal and without

jurisdiction and accordingly, the assessment order passed on the foundation of

such notice is not sustainable and is liable to be quashed. Ld. AR further

submitted that on the facts and circumstance of the case and in law, the CIT(A)

should have held that the assessment order passed by the Assessing Officer is

bad in law and void ab initio. Further elaborating the stand of the Assessing

Officer, ld. AR submitted that satisfaction note does not even satisfy as to the

capacity of the Assessing Officer on which personal satisfaction has been

recorded. Ld. AR further submitted that there are no documents belonging to

the assessee found during search and seizure operation and even as per contents

of the satisfaction note itself, there are no documents found belonging to the

assessee. Ld. AR vehemently contended that as per contents of the satisfaction

note, Annexure A-1, AB-1 page no. 53 & 54, satisfaction has been recorded but

the same documents/pages do not belong to the assessee and it is not even the

case of the Assessing Officer that these documents belong to the assessee. Ld.

AR pointed out that in the second para of satisfaction note, the Assessing


                                       3
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

Officer writes that "therefore, the company wise information appearing in these

pages will be treated as documents pertaining to all the respective companies in

the said chart. Therefore, it is apparent that according to the Assessing Officer

himself, there were no documents pertaining to the assessee but certain

information in the form of chart was treated as documents belonging to the

assessee. Ld. AR further submitted that the manner in which satisfaction note

has been recorded on the basis and contents of the said satisfaction note does

not express any fact that any document or other article belonging to the assessee

was recovered during search and seizure operation. Ld. AR further pointed out

that firstly the Assessing Officer of the searched person has to hold that the

documents etc. seized during the seizure operation belongs to or belong to the

other person, other than the person searched is a prerequisite and in absence of

such satisfaction proceedings u/s 153C of the Act cannot be initiated against

such other person.


4.     Learned counsel of the assessee further referred to his written synopsis

and submitted that the first requirement of law is that the Assessing Officer of

the searched person is required to rebut appeal presumption u/s 132(4A)(i) and

u/s 292C(1)(i) that seized documents do not belong or belongs to the searched

person and then the Assessing Officer of the searched person has to draw an

inference as to whom the seized documents belong to the person other than the

person searched. Ld. AR further contended that in the case of Pepsi Food Pvt.


                                       4
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

Ltd. vs ACIT reported as (2014) 52 Taxmann.com 220(Delhi), the Hon'ble

Jurisdictional High Court of Delhi has held that it is for the Assessing Officer of

the searched person to rebut the presumption and come to a conclusion or

satisfaction that the documents in fact belong to somebody else. There must be

cogent material available with the Assessing Officer before he/she arrives at the

satisfaction that the seized document does not belong to the searched person but

to somebody else and submissions and conjectures of the Assessing Officer

cannot take place of legal satisfaction as required by section 153C of the Act.


5.     Ld. AR also pointed out that this being a position of very first step of the

Assessing Officer of the person searched prior to the handing over such

document etc. to the other person and the Assessing Officer of the other person

has to record satisfaction as per provisions of section 153C of the Act and in the

present case, from first step prior to the issuance of notice u/s 153C of the Act

has not been fulfilled and inasmuch as this condition precedent has not been met

by the Assessing Officer, therefore, notice u/s 153C of the Act is liable to be

quashed.


6.     Ld. AR further placed reliance on the judgment of Hon'ble

Jurisdictional High Court of Delhi in the case of Pepsico India Holdings

Pvt. Ltd. vs ACIT (2014) 50 Taxmann.com 299 (Del) and submitted that the

Hon'ble High Court has made it clear that the Assessing Officer should not

confuse the expression "belongs to" with the expressions "relates to" or "refers

                                         5
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

to" and that too in the present case, the Assessing Officer has not mentioned

that any documents etc. belong to or belongs to was recovered or unearthed

during search and seizure operation, hence, this satisfaction note is hit by the

proposition laid by Hon'ble High Court of Delhi in the case of Pepsi India

Holding Pvt. Ltd. (supra). Ld. Ld. DR has also drawn our attention to last line

of para 2 of the impugned satisfaction note wherein the satisfaction has been

recorded and submitted that the Assessing Officer has simply mentioned that

the company wise information appearing in these pages (Annexure 1 party AB-

1 page no. 53 & 54) will be treated as document pertaining to all the respective

companies, appearing in the said chart. Ld. AR vehemently contended that said

mentioning of the Assessing Officer clearly reveals that there were no

documents etc. before the Assessing Officer at the time of recording satisfaction

as per section 153C of the Act and merely a chart showing details of projects of

Amrapali Group cannot be held as belongs to or belong to the present assessee

company.


7.     Further, ld. AR also placed reliance on the recent judgment dated

10.7.2015 of Hon'ble High Court of Madhya Pradesh in the case of CIT vs

Mechmen passed in I.T.A. No. 44/2011 and other related appeals and

contended that when no satisfaction note has been recorded by the Assessing

Officer of the other person before issuing notice u/s 153C of the Act and none

of the papers belong to or belongs to the assessee have been found during search


                                       6
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

and seizure operation, then the notice u/s 153C of the Act and none of the

papers belong to or belongs to the assessee have been found during search and

seizure operation, then the notice u/s 153C of the Act cannot be held as valid

assumption of jurisdiction and all proceedings in pursuance thereto should be

held as bad in law and void ab initio.


8.     Ld. AR further contended that without prejudice to the above legal

contentions, it is also submitted that even if, for the sake of arguments but not

admitting, it is presumed that the seized documents referred to in satisfaction

note were `belonging to' the assessee and that the Assessing Officer was

entitled to issue notice u/s 153C of the Act, even in such a situation, the

Assessing Officer was duty bound to close the proceedings after calling off

returns u/s 153C of the Act because there is nothing incriminating in the seized

documents. To support this contention, ld. AR placed reliance on the judgment

of Hon'ble Jurisdictional High Court of Delhi in the case of SSP Aviation vs

DCIT (2012) 20 Taxman.com 214 (Delhi).

9.     Ld. DR vehemently contended that the C.O. of the assessee challenging

the jurisdiction of the Assessing Officer is not maintainable in the light of

provisions of section 124 of the Act. Ld. DR placing reliance on the decision of

ITAT Ahmedabad Bench in the case of DCIT vs Sandip M. Patel said to be

reported in 22 Taxmann.com (AHD. TRI) submitted that independent legal



                                         7
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

ground cannot be raised by way of cross objection. He pointed out para no. 3.8

at page 27 of this judgment to support this legal contention.


10.    Ld. AR strongly opposed the aforesaid legal contention of the department

and submitted that the provision of section 124 of the Act is only related to the

territorial jurisdiction of the Assessing Officer which nowhere states about the

jurisdiction of the Assessing Officer provided u/s 153A or 153C of the Act

which is relevant to the present case. Ld. AR further pointed out that the facts

and circumstances of the present case are quite dissimilar and distinguishable

from the facts of the case of Sandip M. Patel (supra) as relied by the ld. AR.


11.    On careful consideration of above submissions and legal contentions of

the ld. Ld. DR, we are of the view that from bare reading of provisions of

section 124 of the Act, it is amply clear that this provision mandates about the

territorial jurisdiction of the Assessing Officer over any one and a rider has been

put about challenge of assessee regarding territorial jurisdiction by this

provision, hence, we decline to accept the contention of ld. CIT DR that the

assessee cannot agitate validity of notice u/s 153C of the Act u/s 124 of the Act.

Furthermore, when we proceed to consider the facts and circumstances of the

case of Sandip M. Patel, we see that the Ahmedabab Tribunal has never decided

that the assessee cannot raise legal objection to the validity of notice u/s 153C

of the Act by way of cross objection. On careful reading of said relevant para

3.8 at page 27 of the said order, we note that these observations as relied by Ld.

                                        8
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

DR have been given in a certain situation which is not similar to the present

case and hence, we respectfully hold that the benefit of the ratio of the decision

of Coordinate Bench of ITAT, Ahmedabad in the case of DCIT vs Sandip N.

Patel is not available for the revenue. Accordingly, we proceed to decide the

cross objection of the assessee challenging the validity of notice u/s 153C of the

Act and all subsequent proceedings held in pursuance thereto.


12.    On cross objections, Ld. DR further supported the action of the Assessing

Officer and submitted that the CIT(A) rightly dismissed ground no. 1,2, 3, 5 (b)

and 6 (b) of the Act upholding the validity of notice u/s 153C of the Act and

reassessment order passed u/s 153C r/w section 143(3) of the Act as the

Assessing Officer rightly assumed jurisdiction to issue notice u/s 153C of the

Act and making reassessment proceedings consequential.


13.    On careful consideration of above submissions of both the sides, at the

very outset, we may point out that the Assessing Officer issued a notice u/s

153C of the Act on 12.4.12 to the assessee asking to file the return of income

for the relevant assessment year after recording reasons for initiation of action

u/s 153C of the Act. Ld. AR has placed a copy of the said reasons spread over 4

pages which we are enclosing with this order as Annexure A-1 for the sake of

clarity and brevity in our findings and observations.


14.    Further, before we proceed to adjudicate the allegation of assessee

challenging the valid assumption of jurisdiction for issuance of notice u/s 153C
                                        9
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

of the Act and all subsequent proceedings, we find it appropriate to carefully

peruse the proposition and dicta laid down by Hon'ble Jurisdictional High Court

and other Hon'ble High Courts on this issue. Firstly, we observe that in the case

of Pepsi Food Pvt. Ltd. vs ACIT (supra) the Hon'ble Jurisdictional High Court

held as under:-


         "6.    On a plain reading of Section 153C, it is evident that the
     Assessing Officer of the searched person must be "satisfied" that
     inter alia any document seized or requisitioned "belongs to" a
     person other than the searched person. It is only then that the
     Assessing Officer of the searched person can handover such
     document to the Assessing Officer having jurisdiction over such
     other person (other than the searched person). Furthermore, it is
     only after such handing over that the Assessing Officer of such
     other person can issue a notice to that person and assess or re-
     assess his income in accordance with the provisions of Section
     153A. Therefore, before a notice under Section 153C can be
     issued two steps have to be taken. The first step is that the
     Assessing Officer of the person who is searched must arrive at a
     clear satisfaction that a document seized from him does not belong
     to him but to some other person. The second step is after such
     satisfaction is arrived at that the document is handed over to the
     Assessing Officer of the person to whom the said document
     "belongs". In the present cases it has been urged on behalf of the
     petitioner that the first step itself has not been fulfilled. For this
     purpose it would be necessary to examine the provisions of
     presumptions as indicated above. Section 132(4A)(i) clearly
     stipulates that when inter alia any document is found in the
     possession or control of any person in the course of a search it
     may be presumed that such document belongs to such person. It is
     similarly provided in Section 292C(1)(i). In other words, whenever
     a document is found from a person who is being searched the
     normal presumption is that the said document belongs to that
     person. It is for the Assessing Officer to rebut that presumption
     and come to a conclusion or "satisfaction" that the document in
     fact belongs to somebody else. There ,must be some cogent
     material available with the Assessing Officer before he/she arrives

                                        10
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

      at the satisfaction that the seized document does not belong to the
      searched person but to somebody else. Surmise and conjecture
      cannot take the place of "satisfaction".

      xxxxxxxxxxx

      11. It is evident from the above satisfaction note that apart from
      saying that the documents belonged to the petitioner and that the
      Assessing Officer is satisfied that it is a fit case for issuance of a
      notice under Section 153C, there is nothing which would indicate
      as to how the presumptions which are to be normally raised as
      indicated above, have been rebutted by the Assessing Officer.
      Mere use or mention of the word "satisfaction" or the words "I am
      satisfied" in the order or the note would not meet the requirement
      of the concept of satisfaction as used in Section 153C of the said
      Act. The satisfaction note itself must display the reasons or basis
      for the conclusion that the Assessing Officer of the searched
      person is satisfied that the seized documents belong to a person
      other than the searched person. We are afraid, that going through
      the contents of the satisfaction note, we are unable to discern any
      "satisfaction" of the kind required under Section 153C of the said
      Act.

      12.      This being the position the very first step prior to the
      issuance of a notice under Section153C of the said Act has not
      been fulfilled. Inasmuch as this condition precedent has not been
      met, the notices under Section 153C are liable to be quashed. It is
      ordered accordingly. The writ petitions are allowed as above.
      There shall be no order as to costs."



15.    We further observe that in the case of Pepsico India Holdings Pvt. Ltd. vs

ACIT, the Hon'ble Jurisdictional High Court of Delhi in para 12 to 16 held as

follows:-

       "12. However, by virtue of the order dated 02.12.2013, the
       Assessing Officer rejected each one of these objections and
       observed that the provisions of Section I53C of the said Act had
       been rightly invoked and the petitioner was directed to comply
       with the assessment proceedings under Section 153C read with

                                         11
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

       Section 143(3) of the said Act insofar as the Assessment Years
       2006-2007 to 2011-2012 were concerned.
       13. Having set out the position in law in the decision of this
       Court in the case of Pepsi Foods Pvt, Ltd. (supra), it must be
       seen as to whether the Assessing Officer of the searched person
       (the Jaipuria Group) could be said to have arrived at a
       satisfaction that the documents mentioned above belonged to
       the petitioners.
       14.      First of all we may point out, once again, that it is
       nobody"s case that the Jaipuria Group had disclaimed these
       documents as belonging to them. Unless and until it is
       established that the documents , do not belong to the searched
       person, the provisions of Section 153C of the said Act do not get
       attracted because the very expression used in Section 153C of
       the said Act is that "where the Assessing Officer 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 he
       satisfied that the seized material (which includes documents)
       does not belong to the person referred to in Section 153A (i.e.,
       the searched person). In the Satisfaction Note, which is the
       subject matter of these writ petitions, there is nothing therein to
       indicate that the seized documents do not belong to the Jaipuria
       Group. This is even apart from the fact that, as we have noted
       above, there is no disclaimer on the part of the Jaipuria Group
       insofar as these documents are concerned.

       15.     Secondly, we may also observe that the finding of
       photocopies in the possession of a searched person does not
       necessarily mean and imply that they "belong" to the person
       who holds the originals. Possession of documents and
       possession of photocopies of documents are two separate
       things. While the Jaipuria Group may be the owner of the
       photocopies of the documents it is quite possible that the
       originals may be owned by some other person. Unless it is
       established that the documents in question, whether they be
       photocopies or originals, do not belong to the searched person,
       the question of invoking Section 153C of the said Act does not
       arise.

       16. Thirdly, we would also like to make it clear that the
       assessing officers should not confuse the expression "belongs
       to" with the expressions "relates to" or "refers to". A registered
       sale deed, for example, "belongs to" the purchaser of the
       properly although it obviously "relates to" or "refers to" the
       vendor. In this example if the purchasers premises are searched
       and the registered sale deed is seized, it cannot he said that it
                                         12
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

       "belongs to" the vendor just because his name is mentioned in
       the document. In the converse case if the vendor"s premises are
       searched and a copy of the sale deed is seized, it cannot be said
       that the said copy "belongs to" the purchaser just because it
       refers to him and he (the purchaser) holds the original sale
       deed. In this light, it is obvious that none of the three sets of
       documents - copies of preference shares, unsigned leaves of
       cheque books and the copy of the supply and loan agreement -J
       can be said to "belong to" the petitioner."






16.    We further observe that in the case of CIT vs Mechmen (supra), the

Hon'ble Madhya Pradesh High Court in para 22 and 23 held as follows:-


             "22. Reverting to the substantial questions of law
      articulated while admitting these appeals, we hold that the same
      will be of no avail to the Department considering the fact
      situation of the present case and for the reasons mentioned
      hitherto. In that, we have rejected the argument that even in
      cases, under Section 153C the Assessing Officer(s) need not
      record satisfaction and in particular at both the stages - be it
      Assessing Officer of searched person or Assessing Officer having
      jurisdiction over such other person. Notably, the requirement of
      recording satisfaction is not for the benefit of the Assessing
      Officer(s), but lending credence to his satisfaction and on which
      matters the assessce can give meaningful explanation and reason
      it out as and when opportunity is given to the concerned
      assessee.
      23. In the present case, the concurrent finding of fact recorded by
      the Appellate Forums is that, no satisfaction has been recorded
      by the Assessing Officer before issuing of notice under section
      153C Further, none of the papers seized belongs or belong to the
      assessee (noticee). The Appellate Forums have further found that
      no addition or even observations have been made by the
      Assessing Officer in any of the orders for the relevant assessment
      years in connection with any material found during the course of
      search Even for that reason no action under section 153C, is
      justified. These findings of fact need no interference and have not
      been questioned before us. Considering the above, these appeals
      must fail."


                                        13
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

17.    Further, Hon'ble Jurisdictional High Court of Delhi in the case of S.S.P.

Aviation vs DCIT (supra) in para 17 held thus:-

              "17. The judgment of this court in Saraya Industries
              Ltd. (supra) was relied upon by Mr. Bajpai, in support of
              his contention that the seizure of the document must be of
              such nature that even closed assessments for six years
              could be reopened and this requirement postulates that
              the provisions of Section 153C can be set in motion only
              if there is a finding that the seized document or books of
              account or valuable article represents the undisclosed
              income of the other person. The said decision does not
              assist the petitioner. The section merely enables the
              revenue authorities to investigate into the contents of the
              document seized, which belongs to a person other than
              the person searched so that it can be ascertained whether
              the transaction or the income embedded in the document
              has been accounted for in the case of the appropriate
              person. It is aimed at ensuring that income does not
              escape assessment in the hands of any other person
              merely because he has not been searched under Section
              132 of the Act. It is only a first step to the enquiry, which
              is to follow. The Assessing Officer who has reached the
              satisfaction that the document relates to a person other
              than the searched person can do nothing except to
              forward the document to the Assessing Officer having
              jurisdiction over the other person and thereafter it is for
              the Assessing Officer having jurisdiction over the other
              person to follow the procedure prescribed by Section
              153A in an attempt to ensure that the income reflected by
              the document has been accounted for by such other
              person. If he is so satisfied after obtaining the returns
              from such qther person for the six assessment years, the
              proceedings will have to be closed. If the returns filed by
              the other person for the period of six years does not show
              that the income reflected in the document has been
              accounted for, additions will be accordingly made after
              following the procedure prescribed by law and after
              giving adequate opportunity of being heard to such other
              person. That, in sum and substance, is the position."



18.    In the light of aforesaid proposition/dicta of Hon'ble Jurisdictional High

Court of Delhi and Hon'ble M.P. High Court, when we analyse the facts and

circumstances of the present case, we observe that from reasons recorded by the

Assessing Officer for initiation of action and issuance of notice u/s 153C of the

                                         14
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

Act, from the contents of reasons recorded, it is apparent that these reasons have

been recorded in the case of Amrapali Grand and the search and seizure

operation u/s 132(1) of the Act on 9.9.2010 was conducted in the Amrapali

Group which is a separate entity and thus we safely infer that the reasons as

(Annexure 1) were recorded in the case of the other person other than the person

searched. From the contents of reasons recorded for issuance of notice u/s 153C

of the Act, we note that after stating the detail of search and seizure operation,

the Assessing Officer of the other person mentions that as per Annexure A-1,

pages 53 & 54 viz. detailed chart of all the projects undertaken by Amrapali

group which contains company wise detail of projects undertaken by various

companies of Amrapali Group, it may be mentioned that Amrapali Group is not

a legal entity but comprises of group of companies which individually and

separately are having their different corporate/partnership firm entities.

Subsequently, the Assessing Officer of the other person i.e. present assessee

states that "Therefore, the company wise information appearing in these pages

will be treated as documents pertaining to all the respective companies,

appearing in the said chart."


19.    At this point, we may point out that the chart appearing on page 53 & 54

contains detail of projects wherein present assessee i.e. Amrapali Grand has

been enlisted at sl. No. 1 and in the other relevant columns, location project

wise stage of completion, cost incurred, cost to be incurred, balance amount to


                                       15
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

be received from cashier, sale value of unsold flats, total receivables and surplus

amounts have been mentioned. This chart contains details of 12 companies

including the present assessee and title of this chart is mentioned as "Amrapali

group, detail of projects".


20.    We further observe that in the first para appearing on page no. 2 of the

reasons recorded, the Assessing Officer of the other person has noted the details

of companies and their managers of Amrapali Group and subsequently it has

been mentioned that during the course of search, incriminating documents as to

unaccounted cash receipts totalling to Rs.31.33 crore were seized which have

been admitted to be unaccounted by the management of search person/entity,

hence surrendered as unexplained income in the books of M/s Ultra Homes

Construction (P) Ltd. In para 1& 2 of the reasons recorded, the Assessing

Officer of the other person noted that "however, the receipt of unaccounted cash

and payment of unaccounted expenses by the management in respect of

Amrapali Grand is imminently possible which is also evident by the documents

seized at pages 54 & 55 of Annexure seized by party AB-1". In view of logical

and vigilant reading of reasons recorded by the Assessing Officer of the other

person set out in the earlier paras, it is clear that the reasons have been recorded

by the person other than the person searched and in the very first part of

allegations, the Assessing Officer of the other person noted that a detailed chart

showing company wise information will be treated as document pertaining to


                                        16
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

respective companies appearing in the said chart. From these observations of

the Assessing Officer of the other person, we can safely infer that according to

the Assessing Officer himself, there were, in fact, no documents belonging to

the assessee but certain information in the form of chart showing details of

company wise projects, which was recovered during the search and seizure

operation on Amrapali group, has been treated as documents pertaining to all

the respective companies appearing in the said chart including the present

assessee. In the said stipulations of reasons recorded, we are unable to see any

observations or facts or any other material which was recovered or unearthed

during the search and seizure operation on Amrapali group on 9.9.2010. We

may point out that the Assessing Officer in para 2 of the reasons recorded

himself noted that during the course of search, incriminating documents as to

the unaccounted cash receipts totalling to Rs.31.33 crore were seized which

have been admitted to have been unaccounted by the management of search

entity and the same was surrendered as unexplained income in the books of M/s

Ultra Home Construction (P) Ltd. which is a company of Amrapali Group. In

this position, when the unaccounted cash receipts have been accounted and

surrendered as unexplained income to M/s Ultra Home, we are unable to see

any other incriminating material or document etc. which could lead the

Assessing Officer of other person to record his satisfaction that documents etc.

belong to or belongs to the present assessee (other person) were seized during

search and seizure operation on Amrapali group. In this position, when the
                                       17
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

unaccounted cash receipts have been accounted and surrendered as unexplained

income of M/s Ultra Home, we are unable to see any other incriminating

material or document etc. which could lead the Assessing Officer of other

person to record his satisfaction that documents etc. belong to or belongs to the

present assessee (other person) were seized during search and seizure operation

on Amrapali group.


21.    In view of foregoing discussion, we are unable to hold that the only basis

of reasons recorded for action u/s 153C of the Act before the Assessing Officer

of the other person i.e. present assessee was a chart containing details of

provision of 12 companies of Amrapali Group including present assessee but

this chart does not qualify the definition of document belonging to person other

than the searched person viz. the present assessee and for initiation of action and

issuance of notice u/s 153C of the Act but seizure of document etc. belonging to

other person is a prerequisite and in absence of search and seizure operation

proceedings u/s 153C of the Act, notice under the said provision cannot be

initiated and issued against such other person. At the cost of repetition, when

we analyse the proposition laid down by Hon'ble Jurisdictional High Court in

the case of Pepsi Food Pvt. Ltd. vs CIT (supra) , we clearly observe that their

lordships have explicitly held that before a notice u/s 153C of the Act can be

issued, two step have to be taken; the first step is that the Assessing Officer of

the person who is searched must arrive at a clear satisfaction that the document


                                        18
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

does not belong to him but to some other person, the second step is; after such

satisfaction is arrived at, the documents be handed over to the Assessing Officer

of the person to whom such document belongs. Their lordships further held that

for this purpose, it would be necessary to examine the provisions of

presumption wherein section 132(4A)(i) clearly stipulates that when inter alia

any document is found in the control and possession of any person in the course

of search, it may be presumed that such books of account, other documents, or

other valuable article or thing belong or belongs to such person and it is also

similarly provided in section 292C(i). Their lordships laying down a dicta

which is binding on us, further held that whenever a document is found from a

person who is being searched, the presumption is that the said documents

belong to that person and 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. It was further held that there must

be cogent reason available with the Assessing Officer before he/she arrives at

the satisfaction that the seized document does not belong to the searched person

but to somebody else and surmises and conjectures cannot take place of

satisfaction.


22.    In the present case, undisputedly and admittedly, there was no satisfaction

note recorded by the Assessing Officer of the person searched. This being the

position, the first step prior to the issuance of notice u/s 153C of the Act has not


                                        19
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

been fulfilled by the Assessing Officer of the person searched i.e. Amrapali

group. When we proceed to evaluate the validity of reasons recorded by the

Assessing Officer of the other person for issuance of notice and initiation of

proceedings u/s 153C of the Act, then from the reasons recorded (Annexure A-

1), it is amply clear that the Assessing Officer has merely picked on pages no.

53 & 54 of the sized material which is, in fact, a chart showing detail of

provision of Amrapali group company including name of the present assessee of

Amrapali Grand at sl. No.1 but this cannot be held as belong to or belongs to the

present assessee. It is further observed that even the Assessing Officer of the

other person has not used the words "belong to or belongs to" in the reasons

recorded and he has noted that the company wise information appearing in these

pages will be treated as document pertaining to all the respective companies

appearing in the said chart. Ld. DR has pointed out that as per amended section

153C of the Act, the word `pertains to' is sufficient for valid assumption of

jurisdiction, issuance of notice u/s 153C of the Act. However, we do not agree

with this contention of the ld. CIT DR as the present case is relevant to

assessment year 2009-10 and the amendment inserted in section 153C of the

Act by Finance Act 2015 is applicable w.e.f. 1.6.2015 and onwards which

cannot be taken as retrospective for placing word `pertain to" or "pertains to".

Per contra, from the reading of pre-revised section 153C, it is clear that there

were words `belong to' or `belongs to' a person other than the person referred to in section

153C of the Act and in the present case, the Assessing Officer of the other person has not

                                            20
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

mentioned `belongs to' or `belong to' in the reasons recorded clearly

demonstrate that the Assessing Officer himself was not sure about the chart

which was used as `pertain to' the present assessee as to whether the same can

be treated as `pertain to' or `pertains to' the present assessee. This ambiguous

state of mind of the Assessing Officer of the other person clearly demonstrates

that the Assessing Officer proceeded to initiate proceedings and to issue notice

u/s 153C of the Act without assumption of valid jurisdiction for the same.


23.    At this juncture, we further take cognizance of the dicta laid down by the

Hon'ble Jurisdictional High Court in the case of Pepsico India Ltd. vs CIT

(supra) wherein speaking for the Jurisdictional High Court, their lordships in

para 16 held that the "the Assessing Officer should not confuse the expression

`belong to' with the expression `relates to' or `refers to'. It is further pertinent to

take cognizance of decision of Madhya Pradesh High Court in the case of CIT

vs Mechmen wherein their lordships after referring to the decisions of Hon'ble

Delhi High Court in the case of Pepsi Food Pvt. Ltd., Pepsico Holding Pvt. Ltd.

and observations in the case of SSP Aviation Ltd. (supra), it has been held that

even in cases u/s 153C of the Act, the Assessing Officer need not record

satisfaction in particular at both the stages, be it Assessing Officer of the

searched person or Assessing Officer having jurisdiction over such other

person, the requirement of recording satisfaction is not for the benefit of the

Assessing Officer but lending credence to his satisfaction and on which matters


                                          21
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

the assessee can give meaningful explanation and reason it out as and when

opportunity is given to the concerned assessee.


24.    At this juncture, it is also relevant to respectfully take cognizance of dicta

laid down by Hon'ble High Court of Delhi in the case of CIT vs MGF

Automobiles Ltd. dated 13.8.15 I.T.A. 13 & 14/2015 wherein speaking for the

Jurisdictional High Court, their lordships held that the Assessing Officer

proceeded to frame assessment u/s 153A of the Act relying on some information

not unearthed during the search, then the assessment orders passed with

reference to section 153A(1) of the Act were unsustainable in law.

Furthermore, the Hon'ble High Court of Delhi in the case of PCIT vs Kurele

Paper Mill Pvt. Ltd. I.T.A. No.369/2015 dated 6.7.15, their lordships held as

follows:-


        "2. The Court finds that the order of the CIT(Appeals) reveals
      that there is a factual finding that "no incriminating evidence
      related to share capital issued was found during the course of
      search as is manifest from the order of the AO." Consequently, it
      was held that the AO was not justified in invoking Section 68 of
      the Act for the purposes of making additions on account of share
      capital."
25.    First of all, it would be appropriate to deal with the contention of the ld.

DR that in the reasons recorded, the Assessing Officer rightly held the chart

showing project wise detail of the Amrapali group of 12 companies including

the present assessee pertained to present assessee and thus, the action of the

Assessing Officer in issuance of notice u/s 153C of the Act and framing


                                         22
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

assessment under said provision was quite correct in view of the amendment in

section 153C of the Act wherein the words `pertain to' or `pertains to' or any

information contained therein `relates to' have been inserted. While we analyse

the intention of the legislature, we are in agreement with the contention of the

ld. AR that this amendment is not retrospective but prospective because said

amendment was inserted by Finance Act 2015 w.e.f. 1.6.15 prospectively which

cannot apply to the present case which pertains to assessment year 2009-10.


26.    On the basis of our foregoing discussion and in the light of proposition

and dicta laid down by Hon'ble High Court of Delhi and Hon'ble M.P. High

Court, we are of the opinion that the following facts and circumstances

emerging from the base document Annexure A-1 i.e. reasons recorded for

initiation of proceedings and issuance of notice u/s 153C of the Act:-


       i)      Undisputedly, Annexure A-1 spread over 4 pages, as annexed to

              this order, has been recorded in the case of other person i.e. present

              assessee.

       ii)    From the record we are unable to see any reason or satisfaction

              recorded by the Assessing Officer of the searched person prior to

              handing over of alleged pages 53 & 54 to the Assessing Officer of

              the other person.

       iii)   Annexure A-1 clearly reveals that the sole basis of the demand by

              the Assessing Officer is the chart i.e. page no. 53 & 54 which

                                         23
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

              contains the project wise detail of 12 companies of Amrapali

              Group including the present assessee which has been tabled at sl.

              No. 1 in this chart. The Assessing Officer of the present assessee

              has noted that this chart is being treated as document pertaining to

              all the respective companies appearing in the said chart.        The

              provisions of section 153C of the Act, as existed at the time of

              recording reason, require that where the Assessing Officer is

              satisfied with any money, bullion, jewellery or other valuable

              article or thing or books of accounts or documents seized or

              requisitioned belongs to or belonged to a person other than the

              person referred to in section 153A of the Act, then the books of

              accounts or documents etc. seized or requisitioned shall be handed

              over to the Assessing Officer for jurisdiction over such other

              person. In the present case, the Assessing Officer of the searched

              person has not recorded any satisfaction to rebut the presumption

              u/s 132(4A)(i) and u/s 292C(i) that seized documents do not belong

              to the searched person. Furthermore, the reasons recorded by the

              Assessing Officer of the other person i.e. present assessee,

              Annexure A-1 clearly reveals that the Assessing Officer of the

              other person in the reasons recorded prior to initiation of action and

              issuance of notice u/s 153C has not recorded that the chart pages

              53 & 54 in Annexure A-1 party AB-1, the sole alleged document
                                         24
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

              belong to or belongs to the present assessee.          However, the

              Assessing Officer of the present assessee referring to the said chart

              has merely mentioned that the company wise non-appearing in

              these pages will be treated as document pertaining to all the

              respective companies which is not a proper and valid reason for

              initiation of action and issuance of notice u/s 153C of the Act.

       iv)    We also observe that except chart pages 53 & 54, there was no

              other document etc. before the Assessing Officer of the present

              assessee at the time of recording reasons for initiation of action and

              issuance of notice u/s 153C of the Act.


27.     In the totality of the facts and circumstances and our finding as noted

above, about the initiation of action and issuance of notice u/s 153C of the Act,

we reach to a logical conclusion that as per proposition laid down by the

Jurisdictional High Court of Delhi in the case of Pepsi Food vs ACIT, Pepsico

Indi Holdings Pvt. Ltd. vs ACIT (supra) which were referred to by Hon'ble

Madhya Pradesh High Court in the case of CIT vs Mechmen (supra), it is vivid

that the first required step of the Assessing Officer of the person who was

searched have not recorded satisfaction that the sole document viz. chart pages

53 & 54 seized during the search and seizure operation of Amrapali Group do

not belong to the searched person but to the present assessee. We further

observe that the reasons recorded by the Assessing Officer of the present


                                         25
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

assessee do not qualify the requirement of valid satisfaction as per provisions of

section 153C of the Act (as existed in the Act at the time of recording

satisfaction) as there is no mention of any allegation that the chart pages 53 &

54 belong to or belongs to the present assessee. At this stage, it is profitable to

take note of the judgement of Hon'ble High Court of Delhi in the case of

Pepsico India Holding Pvt. Ltd. wherein their lordships make it clear that the

Assessing Officer should not confuse the expression `belong to' with the

expression `relates to' or `refers to', meaning thereby that as per dicta laid down

by Jurisdictional High Court, the main requirement is that the reason for

initiation of action and issuance of notice u/s 153C of the Act, the Assessing

Officer of the other person is mandatorily required to record that the documents

etc. belong to belongs to the other person and over such other person, he has

jurisdiction to assess.


28.    In the present case, the base of document i.e. chart pages 53 & 54 does

not belong or belongs to the present assessee as the Assessing Officer of the

other person himself was not clear in his mind that whether this chart belongs to

or belong to the present assessee, therefore, he made jugglery of words by

mentioning that the company wise non appearing in these pages will be treated

as documents pertaining to all respective companies including the assessee

company appearing in the said chart. In this situation, we are inclined to hold

that the reasons recorded by the Assessing Officer of the present assessee for


                                        26
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

initiation of action u/s 153C of the Act and issuance of notice under the said

provision do not quash the requirement of said provision as accepted in the Act

at the time of recording satisfaction. It is also relevant to mention that the so-

called seized document i.e. chart cannot be held as belongs to or belong to the

present assessee and on this ground also, the validity of reasons recorded comes

within the teeth of proposition laid down by Hon'ble Jurisdictional High Court

in the case of Pepsico Holding Pvt. Ltd. (supra) and Pepsi Food Pvt. Ltd. vs CIT

(supra).     Respectfully following the proposition laid down by Hon'ble

Jurisdictional High Court, we are inclined to hold that the reasons recorded for

action u/s 153 of the Act and issuance of notice under the said provision was not

only bad in law but void ab initio which cannot be held as sustainable and

consequently, we quash the same. Accordingly, C.O. of the assessee is hereby

allowed.


I.T.A. No. 6205/Del/2013 for A.Y. 2009-10 on merits


29.      This appeal has been preferred against the same order of Ld. CIT(A)

(supra) which upheld the validity of notice and action u/s 153C of the Act.


30.      Ground Nos. 1 & 4 are general in nature which need no adjudication.

The main grounds raised by the Revenue read as under:-

      "2. On the facts and the circumstances of the case the Ld. CIT(A)
      has erred in law in deleting the addition of Rs. 1,12,60,413/- made
      by AO on account of bogus purchases of raw material.


                                         27
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

      3. On the facts and the circumstances of the case the Ld. CIT(A)
      has erred in law in deleting the addition of Rs.1,71,85,440/- made
      by AO on account of interest free loan & advances."
Ground No. 3 of the Revenue

31.     Apropos Ground No. 2 the Ld. CIT DR pointed out para 7.10 of the

assessment order and submitted that the assessee did not charge any interest in

respect of advances given to them nor any goods have been received during the

year and at the same time, the assessee has borrowed huge interest bearing

funds and has also made payment of interest on loan to Bank of Maharashtra

thus the notional interest @ 8% per annum on interest free advances was rightly

disallowed from interest expenditure claimed by the assessee. The Ld. AR

further pointed out that the Ld. CIT(A) granted relief to the assessee without

any basis, hence, the impugned order may be set aside by restoring that of the

A.O.


32.     The Ld. AR replied that the assessee used its funds which were infused

by the partners into the appellant firm for the project and advances made to

these persons by the assessee were to raise capital for the purpose of business

and these transactions are not in the nature of business advances. The Ld. AR

vehemently contended that the interest payments made by the appellant firm to

Bank of Maharashtra also do not appear to have any nexus with the money

advanced as all the payments are related to the term loan from the Bank for




                                         28
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

various payments to various authorities and all the receipts are from M/s Ultra

Homes as partners contribution to the appellants on going projects.


33.    The Ld. DR also placed rejoinder by submitting that no remand report

was called by the Ld. CIT(A) before granting relief to the assessee and assessee

cannot be allowed to make a new case during appellate proceedings.


34.    At the very outset, we observe that the Ld. CIT(A) granted relief for the

assessee with following observations and conclusions:


        "6.2 I have considered the assessment order and the
       submissions made. Facts are that the appellant firm has
       advanced the money to these persons who are directors in M/s
       Ultra Home Construction Pvt. Ltd. Funding for various projects
       of the Amrapali Group is raised mainly from banks / financial
       institutions, which require that the directors / partners must
       also give personal guarantees for the loans and for such
       guarantees they must themselves have adequate assets and
       liquid funds. M/s Ultra Home Construction Pvt. Ltd. is the flag-
       ship company of Amrapali Group and bank finance is raised by
       this company. This company is also majority partner of the
       appellant firm. Funds are infused by the partners into the
       appellant firm for the project, which in turn advances money to
       the directors of Ultra Home Construction Pvt. Ltd. so that more
       funds / finances can be raised as the project progresses. The
       advances made to these persons by the appellant firm were to
       raise capital for the purpose of business. Therefore, these
       transactions are not in the nature of loan but in the nature of
       business advances. The interest payment made by the appellant
       firm to Bank of Maharastra also does not appear to have any
       nexus with the money advanced as all the payments are related
       to the term loan from the bank or various payments to various
       authorities and all the receipts are from M/s Ultra Home as
       partner's contribution to the appellant's ongoing project."




                                       29
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

35.    In view of above, the Ld. AR has placed reliance on the order of Hon'ble

High Court of Delhi in the case of Tinbox Co. 260 ITR 637 (Delhi) and

submitted that where the firm advanced interest free funds to sister concern, and

there are findings that capital of firm and interest free unsecured loans exceeded

amounts advanced to sister concern, the disallowance of part of interest on

borrowed capital is not justified. In the present case, the A.O proceeded to

make addition by observing that the assessee has not charged interest in respect

of advances of Rs. 21.48 lac given to the persons closely connected nor any

goods have been received from them and on the other hand, the assessee has

taken huge interest bearing loan from Bank of Maharashtra and has also paid

Rs. 3.17 crores thereon. Further, after noting above facts, the A.O proceeded to

make proportionate disallowance of Rs.1.71,85,440/- reducing the interest claim

of the assessee.


36.    On appeal by the assessee, the Ld. CIT(A) granted relief with a

conclusion and observations as reproduced above. The Ld. CIT(A) placing

reliance on the judgment of Hon'ble Delhi High Court in the case of SSP

Aviation Ltd. vs DCIT (supra) held that the impugned addition based on

disallowance of interest does not relate to emanating from the allegation of

suppression of sales or receipt of unaccounted cash in sale of flats. Further, the

first appellate authority also noted that the advances made to these

persons/entities by the assessee firm were to raise capital for the purpose of


                                       30
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

business and also that these transactions are not in the nature of business

advances. The Ld. CIT(A) also noted that the interest payment made by the

assessee to Bank of Maharashtra also does not appear to have any nexus with

the money advanced as all payments. In the light of above noted facts, when we

analyse the action of the A.O. and contentions of the Ld. Ld. DR, we observe

that aforesaid observations of the Ld. CIT(A) have not been controverted by

them. This view also finds support from the dicta laid down by Hon'ble High

Court in the case of Tin Box (supra). Accordingly, we are unable to see any

valid reason to interfere with the order of the first appellate authority. Thus,

Ground No. 3 of the Revenue being devoid of merits is dismissed.


Ground No.2

37.    Apropos Ground No. 2, we have heard arguments of both the sides and

carefully perused the material placed on record before us on this issue. The Ld.

DR supported the action of the A.O and submitted that the assessee claimed

expenditure on account of purchase from certain parties who were involved in

merely issue of purchase bills effecting the payments through banking channels

for commission not actually supported with physical verification of goods. The

Ld. DR also pointed out that Shri A. K. Sharma, Director of group company,

M/s Ultra Homes in his statement recorded on 9/9/2010, during search and

seizure operation, had agreed to surrender huge amounts and hence, when the

assessee failed to produce the relevant party (seller) to prove the genuineness of

                                       31
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

alleged purchase, the A.O was quite correct in making addition in this regard.

The Ld. DR vehemently argued that the Ld. CIT(A) granted relief without any

basis hence impugned order may be set aside by restoring that of the A.O.


38.    Replying to the above, the Ld. Counsel of the assessee strongly supported

the order of the Ld. CIT(A) and submitted that the assessee submitted all

relevant purchase bills, freight bills and Dharma Kanta Weigh Bills but the A.O

simply noted that the assessee failed to produce these alleged vendors, hence he

proceeded to make further addition treating the same as bogus purchases

without any basis and cogent reasoning which was rightly deleted by the Ld.

CIT(A) on the basis of proper appreciation of facts, documents and

circumstances of the case.


39.    From the operation part of the first appellate order, we note that the Ld.

CIT(A) granted relief to the assessee with following observations and

conclusion:


          "3.5 However, so far as the second aspect of the matter is
          concerned, whether AO can travel beyond the satisfaction
          recorded, in my considered view the provision u/s 153C is
          more akin to the provisions of section 147. The assessment is
          to be framed only when the AO comes to the finding that the
          material found belonging to the person indicates or establishes
          income that has not been disclosed in the tax returns filed.
          This implies that the AO is to limit his action within the
          confines of the material found. Section 153C does not permit
          roving enquires nor confers omnibus powers on the revenue to
          assess or reassess the income. When the fact or material, the
          basis on which the proceeding was initiated, is verified and
          does not lead to the conclusion of undisclosed income, the
                                        32
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

          proceeding has to be necessarily closed. In the view 1 have
          taken above, I am supported by Hon'ble Delhi High Court in
          SSP Aviation Ltd v. DC IT [2012] 346 UR 177 cited by Ld. AR
          above. The AO had jurisdiction to initiate proceedings u/s
          153C but having verified the material belonging to the
          appellant, and not finding any undisclosed income on that
          basis, should have closed the proceedings. I hold
          accordingly."

          5.2 The facts are that the appellant apparently purchased
          certain construction materials from Shree Saraswati Steel
          Centre, Ghaziabad (Tor Steel) and Laxmi Enterprises,
          Ghaziabad (Cement). The bills and other documents for these
          purchases were produced before the AO. The payments for the
          purchases were made by the appellant from its bank account
          with Corporation Bank (A/c No.CBCA-27) and Bank of
          Maharastra (CA-227) credited to the bank accounts of Shree
          Saraswati Steel Centre (A/c No.00191131000233) and Laxmi
          Enterprises (A/c No.00191131000929) maintained with
          Oriental Bank of Commerce, Wright Ganj, Ghaziabad. The
          only reason for the revenue to treat these transactions as
          bogus is that Shree Saraswati Steel Centre, stated to be
          running its business from 50, Mali Wara Ghaziabad (LIP),
          was not found at the said premises and the proprietor of Laxmi
          Enterprises did not personally appear (although reply was
          filed by the said concern). The revenue has also linked these
          transactions with an admission made by Sh. Anil Sharma, the
          Managing Director and main person of the Amrapalli group,
          during the course of search that the group had engaged in
          unsubstantiated purchases and his offer to tax of undisclosed
          income amounting to Rs.44,87,02,688/- on this count.

          5.3 I have carefully considered the case made out by the
          revenue in the assessment order vis-a-vis the submissions of
          the appellant and the documents produced before me (also
          produced before the AO). Admittedly, all the documents
          required to establish the purchases were produced by the
          appellant before the AO. However, on failure of the appellant
          to produce Shree Saraswati Steel Centre, the revenue issued
          two summons to the said party to enforce attendance, but the
          summons were returned by post with the remark that the firm
          had '"·left". The appellant was, thereafter, again required to
                                       33
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10




          physically produce the party for verification and upon failure
          to do so the revenue treated the transactions as bogus.
          However, the moot question here is whether it was in order for
          the revenue to subsequently require the appellant to produce
          the party for physical verification? The revenue justifies the
          adverse view it has taken for the reason that the party had not
          been found at the given address. The appellant's claim on the
          other hand is that it is not the case that the party was not in
          existence but rather the party had left the premises as
          evidenced by the noting of the Department of Posts on the
          returned summons. Production of the documents evidencing
          the transactions was in itself sufficient to discharge the
          primary onus on the appellant, and there was no obligation on
          the appellant to physically produce the party before the AO
          unless some defect had been found in the documentary
          evidence so produced. Though technical rules of evidence are
          not strictly applicable to tax proceedings (Dhakeswari Cotton
          Mills Ltd. v. CIT [1954] 26 ITR 775 & Dhakeswari Cotton
          Mills Ltd. v. CIT [1955] 27 ITR 126 (SC)}, taxing authorities
          are not required to put on blinkers while looking at the
          documents produced before them and they are to look into the
          surrounding circumstances to find out the reality of the
          recitals made in those documents {CIT v. Durga Prasad More
          [1971] 82 ITR 540 (SC)). Therefore, in the present case it was
          not appropriate to require the appellant to produce the party
          for physical verification without finding any defect in the
          documentary evidence produced. Further, non appearance of
          the proprietor of Laxmi Enterprises could not be held against
          the appellant unless appellant had been provided with the
          opportunity to produce the said party, which does not appear
          to have been done. From the documents produced, it is seen
          that M/s Shree Saraswati Steel Centre was duly registered with
          the VAT authority having TIN: 09190900301 and CST No, GD
          5243336 and VAT@ 4% was also deducted on the sales; and
          M/s Laxmi Enterprises was duly registered with TIN:
          09388805587 since 01.12.2007 and VAT @ 12.5% had been
          charged on the sales. The appropriate course of action was to
          inform the VAT authorities about the tax deducted so that the
          deposit of tax could have been verified by them. The AO of the
          selling parties could have also been informed about the sales
          made and whether these had been reflected in the tax returns
          filed and to take action if no return had been filed. In any case,
          adverse view could still have been taken against the appellant
                                         34
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

          if neither the VAT had been deposited nor the said parties filed
          any income-tax return. Moreover, the bank accounts of the
          parties, available with the AO, could also have been further
          investigated. None of these courses of action appear to have
          been taken by the revenue. Instead, addition was made for
          non- production of the said party. Business relation can be
          transaction-based, and it is not possible for any business
          concern to physically produce all the parties with which it may
          have had transactions in the past. Therefore, the adverse
          inference drawn by the revenue is pre-mature and without
          sound basis."

40.    At the very outset, we note that the CIT(A) has followed proposition laid

down by Hon'ble Jurisdictional High Court (supra) in the case of SSP Aviation

Ltd. vs DCIT.        We further observe that after detailed discussion on the

documentary evidence of the assessee, the Ld. CIT(A) rightly noted that in the

eventuality when assessee failed to produce alleged vendors, the appropriate

course of action for A.O was to inform VAT authorities about the tax said to be

deducted by the sellers so that the deposit of VAT tax could have been verified

by them.     Simultaneously, the A.O of the vendors could have also been

informed about the sales made and to verify whether these sales had been

reflected in their respective tax returns. The Ld. CIT(A) also mentions that the

A.O could also have investigated bank accounts of the parties (Vendors)

available with him and none of these courses have been taken by the A.O. The

First Appellate Authority rightly concluded that instead of adopting said

available courses, the A.O proceeded to made disallowance and addition for

non-production of vendors parties and adverse inference drawn by the A.O was


                                        35
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10

pre-mature and without any sound basis. The Ld. CIT(A) rightly concluded that

u/s 153C of the Act, the A.O cannot travel beyond the satisfaction recorded and

the impugned addition based on alleged bogus purchases does not pertain to or

emanate from allegation of suppression of sales or receipt of unaccounted cash

in the sale of flats. This view also finds support from dicta laid down by

Hon'ble High Court of Delhi in the case of CIT vs MGF Automobiles Ltd.

(supra) and Pr. CIT vs Kurele Paper Mills. P. Ltd (supra). Accordingly, we are

unable to see any perversity or any other valid reason to interfere with the

impugned order and thus we uphold the same on this issue of additions in regard

to purchases. Accordingly, Ground No. 2 of the Revenue fails.


41.    In the result, cross-objections of the assessee are allowed and appeal of

the Revenue on both the grounds is dismissed.


       The decision is pronounced in the open court on 23.11.15.



              Sd/-                                       Sd/-

   (L.P. SAHU)                                    (C.M. GARG)
ACCOUNTANT MEMBER                           JUDICIAL MEMBER

Dated: 23rd November, 2015
`GS'




                                       36
I.T.A. 6205 & CO 150/D/14
ASSESSMENT YEAR 2009-10




Copy forwarded to:

1.     Appellant
2.     Respondent
3.     CIT
4.     CIT(A)
5.     DR
                                   Asst. Registrar,
                                 ITAT, New Delhi




                            37

 
 
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