Deven J Mehta, Mumbai vs Assessee

आयकर अपील य अ धकरण, मुंबई यायपीठ "डी " मुंबई IN THE INCOME TAX APPELLATE TRIBUNAL" D" BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN (AM) AND AMIT SHUKLA, (JM) सव ी बी.आर.बा करन, लेखा सद य एवं अ मत शु ला, या यक सद य के सम

आयकर अपील सं./I.T.A. No.4984/Mum/2014 ( नधारण वष / Assessment Year :2009-10)

Shri Deven J Mehta, बनाम/ Dy.Commissioner of Income 1401, Raheja Centre, Vs. Tax- CC-44, Nariman Point, Aayakar Bhavan, Mumbai-400021 M K Road, Mumbai-400020 (अपीलाथ /Appellant) .. ( यथ / Respondent)

थायी ले ख ा सं . /जीआइआर सं . /PAN/GIR No. :AAPPM2122C

अपीलाथ ओर से / Assessees by Shri Vijay Mehta and Shri Harsh Bhuta यथ क ओर से/Revenue by Shri Santosh Kumar

सुनवाई क तार ख / Date of Hearing : 9.04.2015 घोषणा क तार ख /Date of Pronouncement : 24.4.2015

आदे श / O R D E R

PER B.R. BASKARAN (AM)

The appeal filed by the assessee is directed against the order dated 9.6.2014 passed by Ld CIT(A)-38, Mumbai and it relates to the assessment year 2009-10. The assessee is aggrieved by the decision of Ld.CIT(A) in confirming the addition to the extent of Rs.3.00 crores, on the basis of loose papers found during the course of search in the premises of assessee's father.

2. The assessee has also raised an additional ground about of satisfaction to be arrived at by the assessing officer of searched person as provided under section 153C of the Act.

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3. The facts relating to the case are stated in brief. The Revenue has carried out search and seizure operation on 6.10.2010 in the case of M/s ARSS Infrastructure Projects Limited and group concerns. The assessee's father named as Shri Jitendra Mehta was also subjected to search in connection therewith. During the course of search proceedings, a loose paper pertaining to the assessee was seized from the father of the assessee. Accordingly, the AO initiated proceedings u/s 153C of the Act in the hands of the assessee. The seized document was a letter addressed by the assessee to a person named as Mrs. Priti with regard to the purchase of a property situated at Alibaugh. The said letter stated that purchase price of property was Rs.20.22 crores and advance payment given to the owners as Rs.3 crores. It was further stated that the balance payment was going to be made on the next day. Hence the AO asked the assessee to explain as to why the above said sum of Rs.20.22 crores should not be assessed as income of the assessee. The assessee replied that the property was intended to be purchased by a friend named as Mr. Yogesh Shah and not by him. However, since the assessee did not furnish any confirmation letter from Mr.Yogesh Shah, the AO took the view that the total consideration mentioned in the loose sheet i.e. Rs.20.22 crores is assessable in the hands of the assessee. In this regard, he took support from the provisions of section 132(4A) of the Act. Accordingly, the AO assessed a sum of Rs.20.22 crores as undisclosed income of the assessee.

4. In the appellate proceedings, the assessee furnished certain additional evidences before the ld.CIT(A) to show that the impugned property transaction did not fructify. Hence the ld.CIT(A) called for a remand report from the AO. During the course of remand proceedings, the AO conducted inquiry with the concerned Sub-Registrar and confirmed that the said land is still standing in the name of original land owner, 3 I . T . A . N o . 4 9 8 4 / Mu m / 2 0 1 4

meaning thereby the contention of the assessee that the purchase of property did not fructify got vindicated. However, since the loose document addressed to Mrs.Priti Bhabhi stated that sum of Rs.3 crores was paid as advance to owners of the land, the ld. CIT(A) took the view that the assessee had already paid advance amount of Rs.3 crores to the land owner, even though the property transaction did not fructify. Accordingly, the ld. CIT(A) restricted the addition to Rs.3 crores, thus granting a relief of Rs.17.22 crores. Still aggrieved, the assessee has filed this appeal before us.

5. The Ld A.R first addressed the legal ground urged by the assessee. The Ld A.R submitted that the search was conducted in the hands of the father of the assessee. The impugned letter was held by the assessing officer of searched person to be belonging to the assessee herein and hence the proceedings u/s 153C of the Act was initiated in the hands of the assessee herein. However, the provisions of sec. 153C mandates that the assessing officer of the searched person must arrive at satisfaction that any document seized during the course of search belongs to any other person other than searched person. Thereafter he has to handover the said document to the assessing officer having jurisdiction over such other person and that AO shall proceed assess or reassess the income of such other person in accordance with the provisions of sec. 153A.

6. The A.R submitted that the assessing officer of the searched person did not record satisfaction as required under sec. 153C of the Act. In the absence of satisfaction, the impugned assessment order is not valid. In support of this proposition, the Ld A.R placed reliance on the following case law:-

(a) Pepsi Foods P Ltd Vs. ACIT (367 ITR 112)(Delhi)

(b) Krishna Sagar Cooperation Vs. DCIT (49 SOT 109) (Luck) 4 I . T . A . N o . 4 9 8 4 / Mu m / 2 0 1 4

(c) Cit Vs. Shettys Pharmaceuticals & Biologicals Ltd (ITTA No.662 and 668 of 2014 dated 26.11.2014)

(d) DSL Properties (P) Ltd Vs. DCIT (2012)(60 SOT 88)(Delhi)

(e) Tanvir Collections (P) Ltd Vs. ACIT (168 TTJ (Del) 145)

7. On the contrary, the D.R submitted that the assessing officer of the searched person (Shri Jitendra Mehta) and the assessee herein (Shri Devan Mehta) are one and same person. He further submitted that the assessing officer has recorded satisfaction in the file of the assessee herein before issuing notice u/s 153C of the Act. Accordingly he submitted there was no requirement to record another satisfaction in the case of Shri Jitendra Mehta. He further submitted that the provisions of sec. 153C does not require recording of satisfaction and hence the satisfaction can be gathered from the seized material. In this regard, he placed reliance on the decision rendered by Hon'ble Supreme Court in the case of MAK Data Ltd (358 ITR 593)(SC). Accordingly he submitted that the satisfaction note recorded in the file of the assessee was sufficient compliance with the provisions of sec. 153C of the Act.

8. We heard the parties and perused the record. The assessing officer as well as the Ld D.R has admitted that the satisfaction note was not recorded in the file of the searched person viz., Shri Jitendra Mehta. In this regard, we may refer to the letter dated 09-04-2015 written by the assessing officer to the Ld CIT(DR), which reads as under:-

"2. In this case, appellant assessee has requested for two satisfaction notes u/s 153C of the Income tax Act, 1961. In this matter, the undersigned would like to point out that action u/s 153A was taken in the case of Shri Jitendra Mehta, father of assessee as warrant was executed in the name of Shri Jitendra Mehta. Once warrant is executed in the name of particular person, proceedings u/s 153A can be begun in case of that person which do not require any satisfaction to be recorded by assessing officer.

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3. Further, some papers were seized from the premises of Shri Jitendra Mehta, which belonged to assessee, i.e., Shri Deven Mehta. Since the PAN of Shri Deven Mehta was centralized with same assessing officer, i.e DCIT, Central Circle-44, Mumbai he recorded his satisfaction u/s 153C of the Income tax Act, 1961 vide order sheet entry dt. 7.2.3013 (sic) in case of Shri Deven Mehta and issued notice u/s 153C to Shri Deven Mehta for block assessment (copy of satisfaction note is attached).

3. (sic) As it is evident that the assessing officer was same for both the cases i.e. Shri Jitendra Mehta and Shri Deven Mehta, there was no need for another satisfaction note to be recorded in the file of Shri Jitendra Mehta."

9. The satisfaction note referred in the above said letter reads as under:-

Reasons for issuing notice u/s 153C of the I.T Act, 1961 In the case of Shri Deven Mehta A.Y 2005-06 to 2010-11

07.02.2013 A search ws u/s 132 conducted in the ARSS Infrastructure group on 06/10/2010. In connection with the same search was also conducted in the case of Shri Jitendra J Mehta (S.J. Impex) and M/s Jyoti Bright Bar Ltd at (Office at 1401, Raheja Centre, Nariman Point, Mumbai). During the search at the premises of Shri Jitendra J Mehta (who is father of Shri Deven Mehta) some document & details have been found which belong to you. Therefore in view of the above this case is covered for proceeding u/s 153C of the I.T. Act, 1961 and accordingly notice u/s 153C is being issued in this case."

10. Since the dispute surrounds the provisions of sub. Sec. (1) of sec. 153C, we extract the same below, for the sake of convenience:-

"153C. (1) Notwithstanding anything contained in section 139, section 147, section148, 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 to belong to a person other than the person referred to in section 153A, then the books of 6 I . T . A . N o . 4 9 8 4 / Mu m / 2 0 1 4

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 income of such other person in accordance with the provisions of section 153A"

A careful reading of the above said provision would show that the assessing officer of the person referred to in section 153A (i.e., person in whose hands search was conducted) should arrive at "Satisfaction" that the money, bullion etc. belong to a person other than the person in whose hands search was conducted. Naturally, the satisfaction should be arrived by the assessing officer while assessing the income of searched person.

11. In the instant case, it is an admitted fact that there is no material to show that the satisfaction was arrived at by the assessing officer of the searched person during the course of assessing his income. In this regard, the ld D.R submitted that the assessing officer was the one and same person for both searched person and the assessee herein. Therefore, the satisfaction was not required or should be deemed to have been arrived at. However, we are very much doubtful about the validity of said contentions. Under the provisions of sec. 132(4A), where any books of account, other documents, money, bullion, jewellery or other valuable article of thing found in the possession or control of any person in the course of search, it may be presumed that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person. In the instant case, the search was conducted in the hands of Shri Jitendra Mehta and the impugned document was seized from his possession. Hence, as per the provisions of sec. 132(4A), it should be presumed that the impugned document belong to Shri Jitendra Mehta. Now in order to arrive at the satisfaction that the said document did not belong to Shri Jitendra Mehta but to some other 7 I . T . A . N o . 4 9 8 4 / Mu m / 2 0 1 4

person, the above said presumption should have been rebutted by some positive action, cogent material etc. One of the possible actions, in our view, could be that the assessing officer should have made enquiries about the document with Shri Jitendra Mehta and he should have identified the owner of the document by disowning the same, thus rebutting the presumption prescribed in sec. 132(4A) of the Act. This situation could lead the assessing officer of the searched person to arrive at the satisfaction that the document or assets found in the possession of the searched person belongs or belongs to any other person or persons. In our view, even though the assessing officer was same for searched person or other person, yet the satisfaction prescribed in sec. 153C of the Act should be arrived at while assessing the income of the searched person.

12. Admittedly, in the present case, there is no material on record to show that the assessing officer has arrived at the satisfaction while assessing the income of the searched person, viz., Shri Jitendra Mehta. A perusal of the letter written by the assessing officer and the satisfaction note referred therein (supra) would show that the search took place on 06/10/2010 and the satisfaction note (titled as "Reasons for issuing notice u/s 153C of the I.T Act, 1961") was written on 07.02.2013, i.e., after expiry of more than 2 years. Further, there was no explanation as to why the assessment of the present assessee was centralized with the assessing officer of the searched person that too without arriving at the satisfaction that any of the seized material belong to the assessee herein.

13. The proposition discussed above finds support from the decision rendered by Hon'ble Delhi High Court in the case of Pepsi Foods P Ltd (supra). The following observations made in the above cited case are relevant here:-

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"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 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 reassess 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 the 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. Surmises and conjectures cannot take the place of "satisfaction".

14. Other case laws relied upon by the assessee also expresses almost the same view. The Ld D.R placed reliance on the decision rendered by Hon'ble Supreme Court in the case of MAK Data Ltd (supra). In our view, the said decision, inter alia, talks about the manner of recording the satisfaction. In our view, the above said decision is not relevant here, since there is no cogent material on record in the case of searched person 9 I . T . A . N o . 4 9 8 4 / Mu m / 2 0 1 4

to show that the assessing officer has arrived at the "Satisfaction" at the time of assessing the income of the searched person.

15. In view of the above, we hold that the "satisfaction" mandated in sec. 153C was not arrived at by the assessing officer while examining/assessing the searched person. In the absence of the same, the notice u/s 153C issued to the assessee herein is bad in law, against the statutory mandate and hence the same is liable to be quashed. Consequently, the impugned appellate and assessment order also are liable to be quashed. We order accordingly.

16. On merits also, we notice that the impugned document (Page 53 of Annexure-I) appears to be a letter written by the assessee to a person named Smt. Pritibhabhi. It talks about the payment of advance of Rs.3.00 crores to the owners. It also talks about the receipt of money from Smt. Pritibhabhi to the tune of Rs.1.52 crores. It further talks about a cheque in the name of Mr. Jitendra Mehta for a sum of Rs.1,00,00,000/-. It further states that the assessee herein is stating that "as per our discussion, I am making the entire payment tomorrow and taking the possession". A perusal of the above said document would show that the assessee Shri Deven Mehta has no where stated that the advance payment of Rs.3.00 crores was made by him out of his own funds. On the contrary, it states that a cheque amount for Rs.1.00 crore is in the name of Shri Jitendra Mehta. Thus, it only talks about a property transaction only. Further, we notice that the assessing officer did not conduct any enquiry with the person named Pritibhabhi, the owners of the property or Jitendra Mehta to ascertain about the veracity of the document and further to establish that the advance payment of Rs.3.00 crores stated therein was paid by the assessee out of his own funds. On the contrary, the assessing officer admitted in the remand report dated 20-02-2014 that the said 10 I . T . A . N o . 4 9 8 4 / Mu m / 2 0 1 4

property does not stand in the name of the assessee, i.e., even after the expiry of about five years from the present assessment year, thus supporting the contention of the assessee that the above said property transaction did not fructify. Thus, we are of the view that the assessing officer has made the impugned addition by simply placing reliance on the document without making any further enquiry to authenticate the same, which is not justified.

17. In the result, the appeal filed by the assessee is allowed.

The above order was pronounced in the open court on 24th Apr, 2015.

th घोषणा खल ु े यायालय म दनांकः 24 Apr, 2015 को क गई ।

Sd sd (अ मत शु ला / AMIT SHUKLA) (बी.आर.बा करन / B.R. BASKARAN) या यक सद य / JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER

मंब ु ई Mumbai: 24th Apr,2015.

व. न.स./ SRL , Sr. PS

आदे श क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. आयकर आयु त(अपील) / The CIT(A)- concerned 4. आयकर आयु त / CIT concerned 5. वभागीय त न ध, आयकर अपील य अ धकरण, मंब ु ई/ DR, ITAT, Mumbai concerned 6. गाड फाईल / Guard file. आदे शानुसार/ BY ORDER, True copy सहायक पंजीकार (Asstt. Registrar) आयकर अपील य अ धकरण, मंब ु ई /ITAT, Mumbai