IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment delivered on: 07.08.2014
W.P.(C) 415/2014 & CM 823/2014
PEPSI FOODS PVT. LTD. .....Petitioner
versus
ASSISTANT COMMISSIONER OF INCOME TAX .....Respondent
W.P.(C) 568/2014 & CM 1151/2014
PEPSI FOODS PVT. LTD. .....Petitioner
versus
ASSISTANT COMMISSIONER OF INCOME TAX .....Respondent
W.P.(C) 570/2014 & CM 1154/2014
PEPSI FOODS PVT. LTD. .....Petitioner
versus
ASSISTANT COMMISSIONER OF INCOME TAX .....Respondent
W.P.(C) 571/2014 & CM 1155/2014
PEPSI FOODS PVT. LTD. .....Petitioner
versus
ASSISTANT COMMISSIONER OF INCOME TAX .....Respondent
WP(C) 415/2014 & Ors. Page 1 of 15
W.P.(C) 575/2014 & CM 1159/2014
PEPSI FOODS PVT. LTD. .....Petitioner
versus
ASSISTANT COMMISSIONER OF INCOME TAX .....Respondent
W.P.(C) 576/2014 & CM 1160/2014
PEPSI FOODS PVT. LTD. .....Petitioner
versus
ASSISTANT COMMISSIONER OF INCOME TAX .....Respondent
Advocates who appeared in these cases:
For the Petitioner : Mr Deepak Chopra, Mr Harpreet Singh, Mr Amit Srivastava,
Mr Piyush K. Singh and Mr Rishi Khanna.
For the Respondent : Mr Rohit Madan, Mr P.Roychaudhuri and Mr Akash Vajpai.
CORAM:
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE SIDDHARTH MRIDUL
JUDGMENT
BADAR DURREZ AHMED, J (ORAL)
1. These six writ petitions pertain to the very same issue and therefore
the same are being disposed of together. The petitioner has challenged the
notices issued under Section 153C of the Income Tax Act, 1961 (hereinafter
WP(C) 415/2014 & Ors. Page 2 of 15
referred to as the ,,said Act) all dated 02.08.2013 pertaining to the
assessment years 2006-07 to 2011-12.
2. The point urged by the learned counsel appearing on behalf of the
petitioner is that the basic ingredient of Section 153C of the said Act has not
been satisfied and, therefore, the notices are without jurisdiction and ought to
be quashed. The learned counsel for the petitioner submitted that Section
153C permits the issuance of a notice by an Assessing Officer of a person
who has not been searched, on the basis of a satisfaction note prepared by the
Assessing Officer of a searched person indicating that during the search
certain documents belonging to the other person (the person not searched)
were found. The learned counsel for the petitioner submitted that before a
notice under Section 153C can be issued in the manner indicated, the
Assessing Officer of the searched person must arrive at a positive
satisfaction that the documents belong to the person not searched. He
submitted that in the first instance a presumption is created by virtue of the
provisions of Section 132(4A)(i) of the said Act that the documents belong
to the searched person. A similar presumption is also indicated by the
provisions of Section 292C of the said Act. The learned counsel for the
petitioner submitted that, therefore, before the Assessing Officer of the
WP(C) 415/2014 & Ors. Page 3 of 15
searched person can be said to have arrived at the satisfaction that the
documents belonged to the other person (the person not searched) there has
to be a rebuttal of that presumption on the basis of some material to which
the Assessing Officer of the searched person should have applied his mind.
He further submitted that on going through the satisfaction note of the
Assessing Officer of the searched person, in the present cases, it is not at all
clear as to on what basis the said Assessing Officer has arrived at the so
called satisfaction that the seized documents belong to the petitioner. It was,
therefore, contended that the notices under Section 153C of the said Act
which are impugned herein are without any basis and ought to be quashed.
3. The learned counsel appearing on behalf of the Revenue contended
that the documents which have been seized during the search operations
conducted on the Jaipuria Group on 27.03.2012 related to the petitioner
(Pepsi Foods Pvt. Ltd.). The learned counsel also handed over copies of the
documents which have been tabulated in the satisfaction note for our
consideration. He submitted that since these documents pertained to
transactions with the petitioner, they can be construed as belonging to the
petitioner and, therefore, there is nothing wrong in the Assessing Officer of
the Jaipuria Group in recording the satisfaction note and expressing his
WP(C) 415/2014 & Ors. Page 4 of 15
satisfaction that the said documents belonged to the petitioner. Consequently,
he submitted that the issuance of the notices by the Assessing Officer of the
petitioner (which incidentally is the same Officer as that of the Jaipuria
Group) cannot be faulted and that the writ petitions ought to be dismissed.
The learned counsel of the Revenue placed reliance on a decision of the
Gujarat High Court in Kamleshbhai Dharamshibhai Patel v. Commissioner
of Income Tax: (2013) 214 Taxman 558. He also placed reliance on a
decision of the Allahabad High Court in the case of Commissioner of
Income Tax v. Classic Enterprises: (2013) 358 ITR 465 and that of a
Division Bench of this court in SSP Aviation Ltd. v. Deputy Commissioner
of Income Tax: (2012) 346 ITR 177. Based on these decisions he contended
that as long as the documents bear some relation with the petitioner, they can
be said to belong to the petitioner and, therefore, there was no illegality
committed by the concerned Assessing Officer in issuing the satisfaction
note as also the impugned notices under Section 153C.
4. Referring to the decision of a Division Bench of this court in SSP
Aviation Ltd. (supra), the learned counsel for the Revenue submitted that the
issuance of the notice under Section 153C is only a first step to the enquiry
which is to follow. He submitted that once the Assessing Officer of the
WP(C) 415/2014 & Ors. Page 5 of 15
searched person arrives at the satisfaction that a document found during the
search operation related to a person other the searched person, then it could
be said that the said document belonged to such other person and the
Assessing Officer was then bound to forward the document to the Assessing
Officer having jurisdiction over the other person (the person not searched),
and, thereafter, it was for that Assessing Officer to follow the procedure
prescribed under Section 153A in an attempt to ensure that the income
reflected in the seized documents had been accounted for by the other person
(the person not searched).
5. We have considered the submissions made by the counsel for the
parties. Before proceeding any further it would be necessary to set out the
relevant provisions of the said Act as applicable to the assessment years
under consideration:-
"153C. (1) Notwithstanding anything contained in
section 139, section 147, section 148, section 149, section
151 and section 153, where the Assessing Officer is
satisfied that any money, bullion, jewellery or other
valuable article or thing or books of account or documents
seized or requisitioned belongs or belong to a person other
than the person referred to in section 153A, then the books
of account or documents or assets seized or requisitioned
shall be handed over to the Assessing Officer having
jurisdiction over such other person and that Assessing
Officer shall proceed against each such other person and
issue such other person notice and assess or reassess
WP(C) 415/2014 & Ors. Page 6 of 15
income of such other person in accordance with the
provisions of section 153A:
Provided that in case of such other person, the reference to
the date of initiation of the search under section 132 or
making of requisition under section 132A in the second
proviso to sub-section (1) of section 153A shall be
construed as reference to the date of receiving the books of
account or documents or assets seized or requisitioned by
the Assessing Officer having jurisdiction over such other
person:
(2) Where books of account or documents or assets seized
or requisitioned as referred to in sub-section (1) has or have
been received by the Assessing Officer having jurisdiction
over such other person after the due date for furnishing the
return of income for the assessment year relevant to the
previous year in which search is conducted under section
132 or requisition is made under section 132A and in
respect of such assessment year
(a) no return of income has been furnished by such
other person and no notice under sub-section (1)
of section 142 has been issued to him, or
(b) a return of income has been furnished by such
other person but no notice under sub-section (2)
of section 143 has been served and limitation of
serving the notice under sub-section (2) of
section 143 has expired, or
(c) assessment or reassessment, if any, has been
made,
before the date of receiving the books of account or
documents or assets seized or requisitioned by the
Assessing Officer having jurisdiction over such other
person, such Assessing Officer shall issue the notice and
assess or reassess total income of such other person of such
assessment year in the manner provided in section 153A."
"132. (1) xxxx xxxx xxxx
WP(C) 415/2014 & Ors. Page 7 of 15
xxxx xxxx xxxx
(4A) Where any books of account, other documents,
money, bullion, jewellery or other valuable article or thing
are or is found in the possession or control of any person in
the course of a search, it may be presumed
(i) That such books of account, other documents,
money, bullion, jewellery or other valuable
article or thing belong or belongs to such
person;
xxxx xxxx xxxx xxxx"
"292C.(1) Where any books of account, other documents,
money, bullion, jewellery or other valuable article or thing
are or is found in the possession or control of any person in
the course of a search under section 132 or survey under
section 133A, it may, in any proceeding under this Act, be
presumed
(i) that such books of account, other documents,
money, bullion, jewellery or other valuable
article or thing belong or belongs to such
person;
xxxx xxxx xxxx xxxx"
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).
WP(C) 415/2014 & Ors. Page 8 of 15
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
WP(C) 415/2014 & Ors. Page 9 of 15
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".
7. This would be the appropriate stage to consider the decisions referred
to by the learned counsel for the Revenue. The decision referred to in
Kamleshbhai Dharamshibhai Patel (supra) is of no relevance insofar as the
present case is concerned. In that case certain documents were said to have
belonged to the petitioners therein but a plea had been taken that as the land,
in relation to which the documents were, no longer belonged to the
petitioners therefore the said documents could not be regarded as belonging
to the petitioners. That is an entirely different situation and the facts of that
case are clearly distinguishable from the facts of the present case. Insofar as
the decision of the Allahabad High Court in Classic Enterprises (supra) is
concerned, we are, with respect, unable to agree with the observations that as
the proceedings are at the very initial stage the "satisfaction" is neither
required to be firm or conclusive. We say so because we are of the view that
this conclusion of the Allahabad High Court is premised on a consideration
of the provisions of Section 158BD of the said Act which are entirely
WP(C) 415/2014 & Ors. Page 10 of 15
different from Section 153C. Under Section 158BD the Assessing Officers
satisfaction is with regard to ,,undisclosed income belonging to a person
other than the searched person. It is obvious that such satisfaction under
Section 158BD by its very nature has to be prima facie and tentative. The
same methodology cannot be imported into Section 153C where, in our
view, the Assessing Officer is required to arrive at a conclusive satisfaction
that the document belongs to a person other than the searched person
because such Assessing Officer has to rebut the normal presumptions which
are suggested by the statute under Sections 132(4A)(i) and 292C(1)(i) of the
said Act. Therefore, the decision of the Allahabad High Court in the case of
Classic Enterprises (supra) would not come to the aid of the Revenue.
8. Insofar as the decision in the SSP Aviation Ltd. (supra) is concerned
we do not find anything therein which militates against the view that we are
taking. In fact the very distinction between Section 153C and 158BD
(although Section 158BD is not mentioned) is indicated by the following
observations of the Division Bench in SSP Aviation Ltd. (supra):-
"It needs to be appreciated that the satisfaction that is
required to be reached by the Assessing Officer having
jurisdiction over the searched person is that the valuable
article or books of account or documents seized during the
search belong to a person other than the searched person.
WP(C) 415/2014 & Ors. Page 11 of 15
There is no requirement in section 153C(1) that the
Assessing Officer should also be satisfied that such
valuable articles or books of account or documents
belonging to the other person must be shown to show to
conclusively reflect or disclose any undisclosed income."
9. It is only in this context that the Division Bench was of the view that
the issuance of the 153C notice was only first step in the process of enquiry.
10. The only thing that remains to be examined now is the satisfaction
note itself. The satisfaction note dated 02.08.2013 is in respect of the
assessment years 2006-07 to 2011-12 and the same reads as under:-
"M/s Pepsi Foods Pvt. Ltd.
AY 2006-07 to 11-12
02.08.2013 Satisfaction Note for issue of Notice u/s 153C
of Income Tax Act, 1961 in the case of M/s
Pepsi Foods Pvt. Ltd, for the Assessment
Years 2006-07 to 2011-12.
Satisfaction Note
A search and seizure operation u/s 132(1) of the
I.T. Act was carried out at the various premises
of M/s Jaipuria Group on 27.03.2012. The
group is also into various other business viz.
Raymond Retail franchisee, real estate and
construction, fast foods, mining, education,
ayurvedic products, information technology and
medical services. One of the major allegations
against the Jaipuria Group is that the assessee
group in order to reduce its taxable profit
indulged in enhancing the cost of raw material
WP(C) 415/2014 & Ors. Page 12 of 15
purchased. On examination of the accounts of
various concerns, it is noticed that raw material
are procured from fixed vendors. Since bulk
purchases are made, rates should have been
lower. However raw material are being
procured on a high rates resulting in lower
taxable income. The bottler shall buy all units of
concentrate required for the manufacture f the
beverage from PFL (Pepsi Foods Ltd.), or a
manufacturer approved in writing by PFL (Pepsi
Foods Ltd.) at a price and in accordance with
the terms and conditions established by the
seller. Being the sole supplier of concentrate to
Jaipuria Group, Pepsi Foods Pvt. Ltd. is closely
associated to Jaipuria Gr.
During the post search investigation, summons
were issued to M/s Pepsi Foods Pvt. Ltd. to
furnish certain details. The complete details
were not furnished.
The following documents were also found and
seized during the course of search and seizure
action u/s 132(1) of I.T. Act, 1961 belonging to
(PFL) M/s Pepsi Foods Pvt. Ltd.
(PAN:AAACP1557E) over which the
jurisdiction lies with the undersigned:
rty/Ann./Page No. Description of Annexure
C-4/A-2/77 This page contains summary of
PFL Claims as on 29-11-2011
(Claims up to 31/10/2011)
C-4/A-4/18-20 These pages contain a detail of D
VAT impact (April 10- June 10)
Vs PFL Support report and MRP
Plan.
C-4/A-4/21-23 These pages contain a details of
discount per C/S PDL VS PFL.
C-4/A-4/27 These pages contain a details of
status of PFL claims.
C-4/A-5/54 This page contains details of
concentrate stock summary as on
31.12.2010.
C-4/A-5/99 This page contains a summary of
WP(C) 415/2014 & Ors. Page 13 of 15
PFL claims as on 8/9/2011.
Claims upto 31/8/2011.
C-4/A-5/100 This page contains a detail of PFL
Support year 2011
Accordingly, section 153C of the I.T. Act, 1961
is applicable to M/s Pepsi Foods Pvt. Ltd. which
state that "where an Assessing Officer is
satisfied that any money, bullion, jewellery or
other valuable article or thing or books of
account or documents seized or requisitioned
belong or belongs to a person other than the
person referred to in section 153A, then the
books of account, or documents or assets, seized
or requisitioned shall be handed over to the
Assessing Officer having jurisdiction over such
other person and that Assessing Officer shall
proceed against such other person and issue
such other person notice and assess or reassess
income of such other person in accordance with
the provisions of section 153A."
In view of facts narrated above, I am satisfied
that the case of M/s Pepsi Foods Pvt. Ltd. is a fit
case for issue of notice u/s 153C of the I.T. Act,
1961. Notice u/s 153C dated 02.08.2013 is
issued requiring the assessee to file return of
income for the A.Y. 2006-07 to 2011-12.
(Pukini Lokho)
Asstt. Commissioner of Income Tax,
Central Circle-12, New Delhi"
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
WP(C) 415/2014 & Ors. Page 14 of 15
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.
BADAR DURREZ AHMED, J
AUGUST 07, 2014/mk SIDDHARTH MRIDUL, J
WP(C) 415/2014 & Ors. Page 15 of 15
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