The Revenue has questioned first appellate order on the sole ground that the learned CIT(A) has erred in deleting the ac1.dition of Rs. 68,00,000 out of the total addition of Rs. 1,25.00.000 made by the AO under s. 68 of the Act on account of unexplained share application money by admitting additional evidence in contravention of r. 46A of IT Rules. 1962.
2. The assessee on the other hand has objected to first appellate order on the validity of the assessment framed under s. 153C r/w s. 143(3) of the Act and upholding of the disallowance of Rs. 34,61,585 on account of the short-term capital loss on the sale of land situated at Rajokri, Delhi (objection Nos. 1, 1.1. 2. 3 and 3.1).
3. The learned Authorised Representative drew our attention to the application moved for condonation of delay of 8 days in filing the crossobjection due to inadvertence on the part of office of the learned chartered accountant of the assessee. He also cited several decisions referred in the application to support its contention that there was no malafide behind the delay. The learned CIT-Departmental Representative opposed the same.
4. Considering the above submission we do not find reason to doubt. the explanation furnished by the assessee for the delay. We thus condone the delay to prefer the disposal of the matter on its merits. In turn applicatioa is allowed.
5. Since the issue raised in objection Nos. 1 and 1.1 of the crossobjection preferred by the assessee questioning the validity of assessment framed under s. 153C of the Act goes to the root of the matter, we prefer to adjudicate upon it first.
6. We have heard and considered the arguments advanced by the parties in view of the orders of the authorities below, material available on record and the decisions relied upon.
7. The facts in brief are that search and seizure operation under s. 132 of the Act was carried out at the remises of Raj Darbar Group of cases on 31st July, 2008. The AO noted that during the course of search operation certain documents belonging to the assessee company were also seized. He initiated proceedings under s. 153C of the Act in the case of assessee. In response to the notice issued under s. 153C of the Act the assessee filed its return of income declaring a loss of Rs. 34,72,761. The AO noted that during the assessment year the assessee had allotted 1,25,00,000 shares of Rs 10 each at a premium of Rs. 90 per share to the six companies. The assessee was asked to prove the genuineness of the transaction by filing necessary evidence. The assessee was also asked to file a note on share premium account. The assessee furnished the list of companies to whom shares were allotted at premium along With amount. It also furnished documents like confirmations, bank statements of these companies, their balance sheets etc. The AO after conducting inquiry came to the conclusion that most of the concerns did not exist on the given address. He accordingly doubted the genuineness of the identities of these concerns and made addition of Rs. 1,25,00,000 claimed to be received from these companies as unexplained cash credit under s. 68 of the Act.
8. The assessee had also claimed a short-term capital loss of Rs. 34,61,585 on sale of land situated at Rajokri, Delhi. The AO was not satisfied With the eArplanation furnished by the assessee in this regard to justify the claimed loss and he disallowed the amount and added the same to the income of the assessee.
9. Before the learned CIT(A) the assessee questioned the validity of the assessment framed under s. 153C of the Act in absence of incriminating material found during the course of search and the additions made by the AO on the merits of the case. The learned CIT(A) did not agree With the contention of the assessee regarding the validity of assessment framed under s. 153C of the Act in the absence of incriminating material found during the course of search. He however, has deleted the addition of Rs. 68,00,000 out of the total addition of Rs. 1,25,00,000 made by the AO on account of unexplained share application money and has sustained the disallowance of claimed loss of Rs. 34,61,585.
10. In support of the issue raised in objection Nos. 1 and 1.1 of the crossobjection, the learned Authorised Representative submitted that the original return of income was filed by the asseseee company declaring a loss of Rs. 34,7l,76l duly supported by audited financial statement for the wear under consideration. The said return was accepted as such no notice under s. 143(2) of the Act was served upon the assessee. Thereafter notice under s. 153C of the Act was issued to the assessee as a result of search conducted at the premises of Raj Darbar Group. In response to the notice issued under s. 153C of the Act return of income was filed declaring a loss as was declared in the Original return of L'1come. He submitted that the AO made addition of Rs. 1,25,00,000 under s. 68 of the Act on account of alleged unexplained cash credit being not satisfied With the genuineness of the share capital received by the assessee and addition of Rs. 34:61,585 was made on account of disallowance of the claimed short-term caplta1loss on sale of land. He submitted t..ltat both these additions are not based on incriminating material detected as a result of search on Raj Darbar Group of cases. He submitted that as a result of search conducted on Raj Darbar Group of cases, proceedings under s. 153C were also initiated for the .asst. yrs. 2003-04 to 2009-10, however no additions have been made therem on the basis of any incriminating material found as a result of search. Thus the additions made by the AO during the year are Without jurisdiction. Learned Authorised Representative also referred p. Nos. 19 to 23 of the p3per book filed on behalf of the Revenue. These are copies of certificat of incorporation, e-filing receipt, Form No. 18 and Form No. 35. Refemng these documents and the contents of the written synopsis, the learned Authorised Representative contended that there is no allegation in the satisfaction note recorded by the AO for initiation of the proceedings under s. 153C in the case of the assessee, copy made available at p. No. 160 of the paper book (assessee) that any document was found "belonging to the assessee". He submitted that photocopies of statutory documents do not constitute "material belonging to assessee". There is no disclosure by the searched person that such documents belong to the assessee. 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 s. 153C of the Act. He submitted further that the statutory documents are not incriminating material which confer jurisdiction under s. 153C of the Act. In this regard he placed reliance on the decision of Hon'ble Delhi High Court in the cases of Pepsico India Holdings (P) Ltd. us. Asstt. CIT & Anr. in WP(C) No. 414/2014 dt. 14th Aug., 2014 [reported at (2014) 270 CTR (Del) 467: (2014) 108 DTR (Del) 306-Ed.] and in the case of Pepsi Foods (P) Ltd. us. Asstt. CIT in WP(C)-415/2014, dt. 7th Aug., 2014 [reported at (2014) 270 CTR (Del) 459: (2014) 108 DTR (Del) 297-Ed.].
11. Learned Authorised Representative also placed reliance on the following decisions :
(i) CIT us. Anil Kumar Bhatia (2012) 80 DTR (Del) 169: (2013) 352 ITR 493 (Del);
(ii) Al-Cargo Global Logistics Ltd. us. Asstt. CIT (2012) 147 TTJ (Mumbai)(SB) 513: (2012) 74 DTR (Mumbai)(SB) 89 : (2012) 137 IT'D 287 (Mumbai)(SB); ..
(iii) Sanjay Agarwal us. Dy. CIT (ITANo. 3184/Del/2013, dt. 16th June, 2014); .
(iv) Jay Steel India vs. Asstt. CIT (2013) 259 CTR (Raj) 281 : (2013) 88 DTR (Raj) 1;
(v) Asstt. CIT vs. Manoj Narayan Agarwal (2014) 99 DTR (Del)(Trib) 279 : (2014) 160 TTJ (Del) 416;
(vi) DSLProperties (ITA No. 1344/Del/2012, order dt. 22nd March, 2013);
(vii) Kusum Gupta & brs. vs. Dy. CIT (ITA No. 4873/Del/2009, order dt. 28thMarch,2013);
(viii) Asstt. CIT vs. Pradeep Kumar (ITA No. 40 16/Del/2011 , order dt. 16th June, 2014);
(ix) SSP Aviation Ltd. vs. Dy. CIT (2012) 252 CTR (Del) 291 : (2012) 70 DTR (Del) 275 : (2012) 346 ITR 177 (Del)
12. Learned Department Representative on the other hand placed reliance on the first appellate order with this contention that a plain reading of provision of s. 153C of the Act indicates that the assessment under s. 153C is mandatory even when no incriminating material is found during the course of' search under s. 132 or in the case of requisition made under s. 132A. He submitted that the provisions under s. 153A are plain and clear and there is no ambiguity. He submitted that it is a well established principle of interpretation of statute that the words of "statutes" must be understood in their natural, ordinarv or popular sense unless the language of statutes is ambiguous. - He submitted that language of s. 153A is simple, clear and unambiguous. It empowers the AO to issue notice and make assessment of specified six years where a search is initiated under s. 132 or requisition is made under s. 132A of the Act. He placed reliance on the following decisions:
(1) IPCALaboratory Ltd. vs. Dy. CIT (2004) 187 CTR (SC) 513 : (2004) 266 ITR 521 (SC); .
(2) Prakash Nath Khanna & Anr. us. CIT & Anr. (2004) 187 CTR (SC) 97 : (2004) 266 ITR1 (SC);
(3) PadmasUTldara Roo (Deed.) & Ors. vs. State of Tamil Nadu & Ors.
(2002) 176 CTR (SC) 104: (2002) 255 ITR 147 (SC). ..
(4) Indian Rayon Corporation Ltd. us. CIT (1998) 146 CTR (Born) 138 : (1998) 231 ITR 26 (Bom); .
(5) Smt. Tarulata Shyam. & Ors. vs. CIT 1977 'CTR (SC) 275 : (1977) 108 ITR 345 (SC).
13. Having gone through the decisions relied upon, we find that the Hon'ble Delhi High Court in the case of Pepsi Foods (P) Ltd. (cited supra) after dl.scussing the issue in detail has been pleased to come to the conclusion that in the satisfaction note apart from saying that the documents belong to the petitioner and that the AO is satisfied that it is a fit case for issuance of notice under s. 153C. Thus relevant extract of the decision is being reproduced below :
"11. It is evident from the above satisfaction note that apart from saying that the documents belonged to the petitioner and that the AO is satisfied that it is a fit case for issuance of a notice under s. 153C, there is nothing which would indicate as to how the presumption which are to be normally raised as indicated above have been rebutted by the AO. 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 s. 153C of the said Act. The satisfaction note itself must display the reasons or bas.is for the conclusion that the AO of the searched person is satistled 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 s. 153C of the said Act.
12. This being the position the very first step prior to the issuance of a notice under s. 151C of the said Act has not been fulfilled. Inasmuch as is condition precedent has not been met, the notices under s. 153 are liable to be quashed. It is ordered accordingly. The writ petitions are allowed as above. There shall be no order as to costs."
14. Again in the case of Pepsico India Holdings (P) Ltd. (cited supra), the Hon'bIe High Court has been pleased to observe that the finding of the photocopies in the. possession of a searched person does not mean and imply that they "belong" to the person who holds the originals. Possession of documents and possession of photocopies of doctiments are two separate things. While the Jaipuria Group may be the owner of the photocopies of the documents and 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 s. 153C of the Act does not arise. The Hon'ble High Court has also been pleased to make it clear that the AOs should not confuse the expression "belongs to" with the expression "relates to" or again "refers to". A registered sale deed for example "belongs to" the purchaser of the property although it obviously "relates to" or again "refers to" vendor. In this example if the purchaser's premises are searched and registered with sale deed is seized, it cannot be said -that it "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 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, undersigned leaves of cheque books and the copy of the supply and loan agreement can be said to "belong to" the petitioner. With these observations the Hon'ble High Court was pleased to hold that the ingredients of s. 153C of the Act have not been satisfied. Consequently notices issued under s. 153C were quashed.
15. Similar are the facts of the present case before us. The documents seized during the-course of search and seizure praceedings from the Raj Darbar Group have been referred as "relating to" the assessee, in the satisfaction note recorded by the AO while initiating the proceedings under s. 153C of the Act against the assessee. Finding a reference in the satisfaction note recorded by the AD for initiation of proceedings J under s. 153C of the Act against the assessee are certificate of incorporation, e-filing receipt, Form No. 18, Form No. 35. In view of the ratio laid down in the above discussed decisions of Hon'ble High Court in the cases of Pepsico India Holdings (P) Ltd. (cited supra) and Pepsi Foods (P) Ltd. (cited supra) the satisfaction of the AD that the said documents "belong to" the assessee is condition precedent to initiate proceedings under s. 153C of the Act. In absence of such finding by the AD, the notice issued under s. 153C in the present case is held invalid. Besides there was no incriminating material found during the course of search and the assessment was not pending or abated to justifY the assessment framed under s. 153A r/w s. 153C as well as s. 143(3) of the Act against the assessee. This view is supported With the decisions cited in para No. 11 hereinabove. The assessment in the question framed in furtherance to the said invalid notice and in absence of incriminating material is thus held as void and the same is quashed as such. The issue raised in objection Nos. 1 and 1.1 of the cross-objection is thus decided in favour of the assessee. These objections are thus allowed.
16. In view of the above finding when the very assessment has been held as void, the remaining objections of the cross-objection questioning the additions sustained by the learned CIT(A) and the grounds of the appeal preferred by the Revenue questioning the action of the CIT(A) in deleting I some additions have become infructuous. The same are being disposed of j as such.
17. In- result, cross-objection preferred by the assessee is allowed and the' appeal preferred by the Revenue is dismissed ..