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From the Courts »
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PEPSICO INDIA HOLDINGS PRIVATE LIMITED Vs. ASSISTANT COMMISSIONER OF INCOME TAX & ANR
September, 20th 2014
        THE HIGH COURT OF DELHI AT NEW DELHI
%                                                      Judgment delivered on: 14.08.2014

+                 WP (C) No.414 of 2014 & CM No.822 of 2014

PEPSICO INDIA HOLDINGS PRIVATE LIMITED ...                                     Petitioner

                                                   Versus

ASSISTANT COMMISSIONER
OF INCOME TAX & ANR                                                      ... Respondents

                                                   WITH

WP (C) No.566 of 2014 & CM No.1149 of 2014

PEPSICO INDIA HOLDINGS PRIVATE LIMITED ...                                     Petitioner

                                                   Versus

ASSISTANT COMMISSIONER
OF INCOME TAX & ANR                                                      ... Respondents

                                                   AND

+                 WP (C) No.567 of 2014 & CM No.1150 of 2014

PEPSICO INDIA HOLDINGS PRIVATE LIMITED ...                                     Petitioner

                                                   Versus

ASSISTANT COMMISSIONER
OF INCOME TAX & ANR                                                      ... Respondents

                                                   AND

+                 WP (C) No.572 of 2014 & CM No.1156 of 2014


WP (C) Nos.414, 566, 567, 572, 573 & 574 of 2014                               Page 1 of 17
PEPSICO INDIA HOLDINGS PRIVATE LIMITED ...                        Petitioner

                                                   Versus

ASSISTANT COMMISSIONER
OF INCOME TAX & ANR                                         ... Respondents

                                                   AND

+                 WP (C) No.573 of 2014 & CM No.1157 of 2014

PEPSICO INDIA HOLDINGS PRIVATE LIMITED ...                        Petitioner

                                                   Versus

ASSISTANT COMMISSIONER
OF INCOME TAX & ANR                                         ... Respondents

                                                   AND

+                 WP (C) No.574 of 2014 & CM No.1158 of 2014

PEPSICO INDIA HOLDINGS PRIVATE LIMITED ...                        Petitioner

                                                   Versus

ASSISTANT COMMISSIONER
OF INCOME TAX & ANR                                         ... Respondents
Advocates who appeared in this case:
For the Petitioner  : Mr Deepak Chopra, Ms Rashi Khanna &
                      Mr Harpreet Ajmani, Advs.
For the Respondents : Mr Rohit Madan, Adv.

CORAM:
HON'BLE MR. JUSTICE BADAR DURREZ AHMED
HON'BLE MR. JUSTICE NAJMI WAZIRI

                                           JUDGMENT


WP (C) Nos.414, 566, 567, 572, 573 & 574 of 2014                  Page 2 of 17
BADAR DURREZ AHMED, J. (ORAL)

1.       These six (6) writ petitions raise a common issue and therefore the

same are being decided together. The relevant Assessment Years are

2006-2007 to 2011-2012. By way of these writ petitions the petitioner

(PepsiCo India Holdings Private Limited) has sought the quashing of the

notices issued on 02.08.2013 under Section 153C of the Income Tax Act,

1961 (hereinafter referred to as the ,,said Act).

2.       A search and seizure operation under Section 132(1) of the said

Act was conducted on 27.03.2012 on the Jaipuria Group. It is the case of

the Revenue that during the said operation certain documents "belonging"

to the petitioner were found. Consequently, the Assessing Officer of the

Jaipuria Group prepared a Satisfaction Note dated 29.07.2013 to the

effect that the documents mentioned therein belonged to the petitioner. It

is thereafter that the Satisfaction Note as well as the said documents were

symbolically handed over to the Assessing Officer of the petitioner. We

use the expression "symbolically handed over" because of the fact that

the Assessing Officer of the Jaipuria Group and the Assessing of the

petitioner was one and the same person. It is thereafter that the said

Assessing Officer issued notices to the petitioner, all dated 02.08.2013,





WP (C) Nos.414, 566, 567, 572, 573 & 574 of 2014                  Page 3 of 17
under Section 153C of the said Act seeking to reopen the assessments of

the petitioner for the years 2006-2007 to 2011-2012 and to follow the

procedure prescribed under Section 153A of the said Act.

3.       In response to the said notices, the petitioner submitted its

objections on 09.10.2013. Those objections were rejected by an order

dated 02.12.2013 passed by the Assessing Officer. Pursuant thereto, the

petitioner, being aggrieved by the action taken and proposed to be taken

against the petitioner, has filed these writ petitions seeking the quashing

of the said notices under Section 153C of the said Act.

4.       Before we examine these writ petitions in detail it would be

pertinent to point out that recently in the case of Pepsi Foods Pvt. Ltd.

Vs. Assistant Commissioner of Income Tax, WP (C) No.415/2014 and

other connected matters, this court had occasion to examine the very

provisions which are under consideration in the matters before us. In the

judgement delivered on 07.08.2014 in the case of Pepsi Foods Pvt. Ltd.

(supra), after examining the provisions of Sections 153C, 132(4A)(i) &

292C(1)(i) of the said Act, this Court had observed 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


WP (C) Nos.414, 566, 567, 572, 573 & 574 of 2014                   Page 4 of 17
         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 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".

         xxxx              xxxx               xxxx   xxxx       xxxx

         "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.



WP (C) Nos.414, 566, 567, 572, 573 & 574 of 2014                       Page 5 of 17
         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."

5.       While coming to the aforesaid conclusions the court had also

examined the decisions which had been cited on behalf of the Revenue

and which are, once again, being reiterated by the learned counsel for the

Revenue before us. Those decisions are Kamleshbhai Dharamshibhai

Patel v. Commissioner of Income Tax: (2013) 214 Taxman 558;

Commissioner of Income Tax v. Classic Enterprises: (2013) 358 ITR

465 and a decision of a Division Bench of this Court in SSP Aviation

Ltd. v. Deputy Commissioner of Income Tax: (2012) 346 ITR 177. This

Court had indicated in its judgement in Pepsi Foods Pvt. Ltd. (supra) that

the     case      of     Kamleshbhai               Dharamshibhai   Patel   (supra)    was

distinguishable on facts. Those observations would apply to the present

writ petitions also. As regards the decision of the Allahabad High Court

in Classic Enterprises (supra), this Court had indicated that it could not

agree with the conclusions and observations of the Allahabad High Court


WP (C) Nos.414, 566, 567, 572, 573 & 574 of 2014                              Page 6 of 17
inasmuch as the decision of the Allahabad High Court was premised on a

consideration of the provisions of Section 158BD of the said Act which

are entirely different from the provisions of Section 153C of the said Act.

Furthermore, with regard to the decision in SSP Aviation Ltd. (supra),

this court had noted that the said decision does not militate against the

view taken in Pepsi Foods Pvt. Ltd. (supra).

6.       The learned counsel for the Revenue has cited an additional

decision before us today and that is the case of Sarvesh Kumar Agarwal

Vs. Union of India & Ors. [2013] 353 ITR 26 (All). This decision also,

in our view, does not advance the case of the Revenue. This would be

evident from the observations of the Allahabad High Court in paragraphs

19 to 21 of the said decision, which read as under:

         "19. In Manish Maheshwaris case (Supra) the Supreme Court
         observed that taxing statute must be constructed strictly. The
         Court, however, shall not interpret statutory provisions in such a
         manner, which would create an additional physical burden on a
         person. In case of any doubt or dispute, construction is to be
         made in favour of the tax payer and against the revenue.

         20. In the present case we do not find anything wrong in the
         satisfaction note and the forwarding of the entire matter by the
         Income Tax Officer, Ward-III (2), Ahmedabad to the Assessing
         Officer of the petitioner at Bareilly. All the requirements of
         Section 153(c) were complied with by the Income Tax Officer,
         Ward-III (2), Ahmedabad. A search under Section 132A was
         carried out and bullion was seized. The case was selected for
         compulsory scrutiny for six assessment years. The assessee


WP (C) Nos.414, 566, 567, 572, 573 & 574 of 2014                    Page 7 of 17
         established that the seized silver belongs to M/s Sarvesh
         Jewellers, Bareilly ­ the petitioner. The ownership and
         consignment of the petitioner was also confirmed by the
         Assessing Officer of the petitioner at Bareilly. The Income Tax
         Officer, Ward-III (2), Ahmedabad did not commit any error in
         law, in recording the satisfaction note requesting the petitioners
         Assessing officer to proceed under Section 153(c) of the I.T. Act.

         21. After the assessment of the person in respect of whom
         search action was carried out is completed, the officer under
         Section 153C, where he find that seized articles belong to some
         other person, has to forward a satisfaction note to the Assessing
         Officer on such person. The satisfaction in such case is in respect
         of the material and disclosures of the person with which the
         articles or assets are found and not in respect of the person who
         whom they belong."
                                                        (underlining added)

7.       The above extract makes it clear that a taxing statute must be

construed strictly and in the case of a doubt or dispute the construction in

favour of the assessee has to be adopted. Apart from this, the material

observation of the Allahabad High Court in the case of Sarvesh Kumar

Agarwal (supra) is to be found in paragraph 20 thereof where it has been

observed that the assessee established that the seized silver belongs to

M/s. Sarvesh Jewellers, Bareilly ­ the petitioner. In other words, the

person from whom the bullion was seized was able to establish that it did

not belong to him but to Sarvesh Jewellers. It is in that context that the

provisions of Section 153C of the Act were invoked inasmuch as the

Assessing Officer would then be considered as having been satisfied that


WP (C) Nos.414, 566, 567, 572, 573 & 574 of 2014                     Page 8 of 17
the bullion which was seized from the searched person did not belong to

the searched person but to some other person (in that case M/s. Sarvesh

Jewellers, Bareilly).

8.       From the foregoing discussion it is evident that in order that the

Assessing Officer of the searched person comes to the satisfaction that

documents or materials found during the search belong to a person other

than the searched person, it is necessary that he arrives at the satisfaction

that the said documents or materials do not belong to the searched person.

We may point out that in the course of the arguments we had asked the

learned counsel for the Revenue as to whether the documents in question

had been disclaimed by the Jaipuria Group. The learned counsel for the

Revenue, on instructions, states that this was not the case. In other

words, it follows that the Jaipuria Group did not say that the documents

did not belong to them.

9.       It would now be necessary for us to examine the Satisfaction Note

dated 29.07.2013. The said Note is as under:

                           "M/s Pepsico India Holding Pvt. Ltd.,
                                    Satisfaction Note
                                A.Y. 2006-07 to 2011-12

         29-07-2013 Satisfaction Note for issue of Notice u/s 153C of
         Income Tax Act, 1961 in the case of M/s Pepsico India Holding


WP (C) Nos.414, 566, 567, 572, 573 & 574 of 2014                   Page 9 of 17
         Pvt. Ltd. (PAN: AAACP1272G), for the Assessment Years 2006-
         07 to 2011-12

         In the case of Jaipuria Grrup, search and seizure action u/s 132(1)
         of I.T. Act, 1961 was carried out on 27.03.2012 and during the
         course of search and seizure action certain documents/papers were
         found and seized. The following documents which were found
         and seized during the course of search and seizure action u/s 132
         (1) of I.T. Act, 1961 are found to be belonging to M/s Pepsico
         India Holding Pvt. Ltd. (PAN: AAACP1272G) over which the
         jurisdiction lies with the undersigned:

  Party/Annx./Page No.                       Description of Annexure

  B-2/A-11/34-35                             These two pages are the 10 years
                                             Cumulative Redeemable preference Shares
                                             of Rupees.10/- each, purchased by M/s
                                             PepsiCo India Holding Ltd. from M/s
                                             Tripty Drinks Ltd. And 10 years
                                             Cumulative Redeemable Preference Shares
                                             of Rupees 10/- each, purchased by M/s
                                             PepsiCo India Holding Ltd. from M/s SMV
                                             Beverages Ltd.

  B-2/A-14/60                                This is a cheque of Rs.1,66,84002/- in
                                             favour of Pepsico India Holding Pvt. Ltd.
                                             issued by M/s Neetar Beverages Pvt. Ltd.
                                             on 30/6/2012.

  B-2/A-14/61                                This is the cheque of Rs.60000000/- in
                                             favour of Pepsico India Holding Pvt. Ltd.
                                             issued by M/s Neetar Beverages Pvt. Ltd.
                                             on 31.05.2011.

  B-2/A-14/62                                This is the cheque of Rs.60000000/- in
                                             favour of Pepsico India Holding Pvt. Ltd.
                                             issued by M/s Neetar Beverages Pvt. Ltd.


WP (C) Nos.414, 566, 567, 572, 573 & 574 of 2014                            Page 10 of 17
                                             on 31/5/2010.

  B-2/A-14/63                                This is the cheque of Rs.60000000/- in
                                             favour of Pepsico India Holding Pvt. Ltd.
                                             issued by M/s Neetar Beverages Pvt. Ltd.
                                             on 31/5/2009.

  B-2/A-14/64                                This is a cheque of Rs.54691818/- in favour
                                             of Pepsico India Holding Pvt. Ltd. issued by
                                             M/s SMV Agencies Pvt. Ltd. on 30/6/2012.

  B-2/A-14/65                                This is the cheque of Rs.60000000/- in
                                             favour of Pepsico India Holding Pvt. Ltd.
                                             issued by M/s SMV Agencies Pvt. Ltd. on
                                             31.05.2012.

  B-2/A-14/66                                This is the cheque of Rs.60000000/- in
                                             favour of Pepsico India Holding Pvt. Ltd.
                                             issued by M/s SMV Agencies Pvt. Ltd. on
                                             30.04.2012.

  B-2/A-14/67                                This is the cheque of Rs.60000000/- in
                                             favour of Pepsico India Holding Pvt. Ltd.
                                             issued by M/s SMV Agencies Pvt. Ltd. on
                                             30/06/2011.

  B-2/A-14/68                                This is the cheque of Rs.60000000/- in
                                             favour of Pepsico India Holding Pvt. Ltd.
                                             issued by M/s SMV Agencies Pvt. Ltd.
                                             dated: 30/04/2011.

  B-2/A-14/69                                This is the cheque of Rs.60000000/- in
                                             favour of Pepsico India Holding Pvt. Ltd.
                                             issued by M/s SMV Agencies Pvt. Ltd.
                                             dated: 30/6/2010.

  B-2/A-14/70                                This is the cheque of Rs.60000000/- in
                                             favour of Pepsico India Holding Pvt. Ltd.


WP (C) Nos.414, 566, 567, 572, 573 & 574 of 2014                              Page 11 of 17
                                             issued by M/s SMV Agencies Pvt. Ltd.
                                             dated: 30/04/2010.

  B-2/A-14/71                                This is the cheque of Rs.60000000/- in
                                             favour of Pepsico India Holding Pvt. Ltd.
                                             issued by M/s SMV Agencies Pvt. Ltd.
                                             dated: 30/04/2009.

  B-2/A-14/72                                This is the cheque of Rs.60000000/- in
                                             favour of Pepsico India Holding Pvt. Ltd.
                                             issued by M/s SMV Agencies Pvt. Ltd.
                                             dated: 30/6/2009.

  C-2/A-1/101-115                            These pages relates to "supply and loan
                                             agreement" made between Pearl Drinks Ltd.
                                             and Pepsico India Holdings Pvt. Ltd. on 01-
                                             10-2010.






         I have examined the above mentioned documents/paper and
         satisfied that the provisions of section 153C of I.T. Act, 1961 are
         applicable in the case of M/s Pepsico India Holding Pvt. Ltd.
         (PAN: AAACP1272G). As the undersigned is having the
         jurisdiction over the case of M/s Pepsico India Holding Pvt. Ltd.
         (PAN: AAACP1272G), notices u/s 153C of I.T. Act, 1961 are
         issued on 29.07.2013 for the Assessment Years 2006-07 to 2011-
         12.

                                                         (Pukini Lokho)
                                     Asstt. Commissioner of Income Tax,
                                            Central Circle-12, New Delhi"

10.      On going through the Satisfaction Note it is evident that there are

three kinds of documents which are mentioned therein. First, are the

photocopies of Cumulative Redeemable Preference Shares purchased by


WP (C) Nos.414, 566, 567, 572, 573 & 574 of 2014                              Page 12 of 17
PepsiCo India Holdings Private Limited from M/s. Tripty Drinks Limited

and M/s. SMV Beverages Limited. The second set of documents are

cheques found in the cheque books of the Jaipuria Group companies.

These cheques are unsigned and they are the original leaves in the cheque

books themselves which belonged to the Jaipuria Group of companies.

Though, it must be pointed out that the cheques had been written in

favour of PepsiCo India Holdings Private Limited. The third document is

a photocopy of a Supply and Loan Agreement made on 01.10.2010

between Pearl Drinks Limited and PepsiCo India Holdings Private

Limited.

11.      In the objections furnished by the petitioner, it had specifically

taken the point that the photocopies of the preference shares do not

belong to the petitioner. The photocopies belong to the Jaipuria Group.

It was, however, stated that the original preference shares certificates are

with the petitioner and it is the originals which belong to them and not the

copies. It was also contended by the petitioner in the objections that the

unsigned cheques could, by no stretch of imagination, belong to the

petitioner as they had not even been handed over to the petitioner and

were to be found in the cheque books of the Jaipuria Group companies



WP (C) Nos.414, 566, 567, 572, 573 & 574 of 2014                 Page 13 of 17
themselves. Insofar as the copy of the Supply and Loan Agreement was

concerned, the petitioner pointed out that the copy that was found in the

possession of the Jaipuria Group belonged to the Jaipuria Group whereas

the original which belonged to the petitioner was with the petitioner.

Therefore, it was contended that none of the documents found during the

course of searches conducted on the Jaipuria Group which find mention

in the Satisfaction Note dated 29.07.2013, could be said to have belonged

to the petitioner. Consequently, it was urged that the proceedings under

Section 153C of the said Act ought to be dropped.

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 153C of the said Act had been rightly invoked and

the petitioner was directed to comply with the assessment proceedings

under Section 153C read with 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




WP (C) Nos.414, 566, 567, 572, 573 & 574 of 2014                  Page 14 of 17
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 nobodys 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 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

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




WP (C) Nos.414, 566, 567, 572, 573 & 574 of 2014                 Page 15 of 17
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 property 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 be

said that it ,,belongs to the vendor just because his name is mentioned in



WP (C) Nos.414, 566, 567, 572, 573 & 574 of 2014                       Page 16 of 17
the document. In the converse case if the vendors 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 ­ can be said to ,,belong to the petitioner.

17.      In view of the foregoing discussion, we do not find that the

ingredients of Section 153C of the said Act have been satisfied in this

case. Consequently the notices dated 02.08.2013 issued under Section

153C of the said Act are quashed. Accordingly all proceedings pursuant

thereto stand quashed.

18.      The writ petitions are allowed as above. There shall be no orders

as to costs.

19.      All pending applications also stand disposed of.



                                                   BADAR DURREZ AHMED, J.



AUGUST 14, 2014                                        NAJMI WAZIRI, J.
b'nesh


WP (C) Nos.414, 566, 567, 572, 573 & 574 of 2014                     Page 17 of 17

 
 
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