Ita 502/2016 v. Ita 503/2016

$-26, 27, 28 & 29 *IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 502/2016 versus + ITA 503/2016 +ITA 505/2016 PRINCIPAL COMMISSIONEROFINCOMETAX-CENTRAL-2 .... Appellant Through:Mr.DileepShivpuri, Senior standingcounsel with Mr. Sanjay Kumar, Juniorstanding and Mr. Vikrant A. Maheshwari,counsel. versus LAIRYDISTRIBUTORSPVTLTDRespondentThrough:Mr. Salil Aggarwal with Mr. Ravi Pratapand Mr. ShaileshGupta,Advocates. AND + ITA 506/2016 PRINCIPAL COMMISSIONEROFINCOMETAX-CENTRAL-2 .... Appellant Through:Mr.Dileep Shivpuri, Senior standingcounsel with Mr. Sanjay Kumar, Juniorstanding and Mr. Vikrant A. Maheshwari,counsel. versus BALRAMVE^JIMAYPVT. LTDRespondentThrough:Mr. Salil Aggarwal with Mr. Ravi Pratapand Mr. Shailesh Gupta, Advocates. CORAM: JUSTICE S.MURALIDHARJUSTICE GRANDER SHEKHAR ORDER%24.04.2017 CM APPL 27325/2016 (Exemption)in ITA 502/2016CM APPL 27347/2016(Exemption)in ITA 505/2016CM APPL 27352/2016(ExemptionV in ITA 506/2016 1. Allowed, subject to all just exceptions. ITA Nos. 502/2016. 503/2016. 505/2016 & 506/2016 2. These are four appeals by,theRevenue under Sectipn 260A of the IncomeTax Act, 1961 ('Act')directedagainsta commonorderdated 27^*^ January,2016 passed by the Income Tax Appellate Tribunal (TTAT') in ITA No.6947/Del/2014{Lairy DistributorsPvt. Ltd. v. Deputy CIT); ITA No.7060/Del/2014(Sunny Infra ProjectsLtd.v.CIT(A)-XXVI); ITA No.6948/Del/2014 (BalramVinimay Pvt. Ltd. v. Deputy CIT) and ITA No.7061/Del/2014(Sunny InfraProjectsLtdv.The CIT(A)XXVI). TheAssessmentYears('AYs')involvedare2006-07asregardsLairyDistributors Pvt. Ltd.; 2007-08 & 2010-11 as regards Sunny Projects Ltd.and 2007-08 as regards Balram Vinimay Pvt. Ltd. 3. The common question of law framed by this Court in all four appeals bytheorderdated 5^*^ October,2016 is as under: "Whether on the facts and in the circumstancesof the case the learnedITAT 'erred in law in holding that AO did not have any lawful andvalid jurisdiction for initiation of proceedings and issuance of noticeunder Section 153C of Income Tax Act, 1961?" 4. The Court has heard the submissionsof Mr. Dileep Shivpuri, learnedSenior standing counsel appearing for the Revenue and Mr. Salil Aggarwal,learned counsel appearing for the Assessees. 5. Although several issues concerningthe validityof the initiationof theunderSection153C ofthe Act and whetherthe assessmentwasproceedingswithoutjurisdictionwere argued,the Court is of the view that the issue canbe answered on a narrower point viz.,whether there was, in fact, anyincriminatingmaterialrecoveredduringthe search qua the Assesseeswhichcould justify the additions made. 6. The facts inbriefare that a searchtookplaceon 10^ January,2012 inthecase of Minda Group. During the course of search and seizure operation, Mr.Santosh Kumar Jain, stated to be an entry operator, was also searched. In hisstatement, he is purported to have accepted that he was engaged in providingaccommodation entries to the group companies of Mr. Ashok Minda. Headmitted that he was a Director of several companies of which five wereATN International Limited; Silicon VaUey Infotech Limited, Blue ChipIndia Limited; Amluckie Investment Co. Ltd. and Bahubali PropertiesLimited. He also admitted that previously his staff members and his friendswere Directors of Dhansafal Vyapar Pvt. Ltd., Whiteline Barter Ltd. andArihant Ltd. and in that way he was related to Minda Group of Companies. 7. As far as the Assessees in question were concerned, only one of the abovenamed companies, Bahubali Properties Limited, was a shareholder in theAssesseecompanies.Inhis assessmentorder dated 30^ March,2014, in thecase of Sunny Infra Projects Limited for the AY 2010-11, the AssessingOfficer ('AO') noted that to facilitate independent verification of the receiptof the share capital and share premium, notices under Section 133(6) of theAct were issued on 14^^ February,2014 to the PrincipalOfficerof each of Page 4 of 8 .J 7. As far as the Assessees in question were concerned, only one of the abovenamed companies, Bahubali Properties Limited, was a shareholder in theAssesseecompanies.Inhis assessmentorder dated 30^ March,2014, in thecase of Sunny Infra Projects Limited for the AY 2010-11, the AssessingOfficer ('AO') noted that to facilitate independent verification of the receiptof the share capital and share premium, notices under Section 133(6) of theAct were issued on 14^^ February,2014 to the PrincipalOfficerof each of Page 4 of 8 .J the investorcompaniesto furnishtheir responsealong with bank accounts,minutesofmeetings,detailsofPAN cards,names-andaddressesofDirectorsetc. The AO then cameto the conclusionthat the replies submittedwere notsatisfactory as to the identity, genuineness and creditworthinessof the.investment.The AO observedthat it was gathered during the post-search.proceedingsthat SunnyInfraProjectsLimitedwas a papercompanyrun byMr. Santosh Kumar Jain and that the share capital and share premium"inductedduring the year is nothing but unaccountedbusiness income ofAshokMinda Group of Companieswhichhas been routedby entry operator wasin thethroughvariousbogus companies." Interestingly,there nothinganswers given to the questionsposed to Mr. Santosh Kumar Jain, whichlinked him to any of the Assessees. .8. After the search concluded and during the course of assessment, a letterwas receivedfrom the DCIT, CentralCircle-II,Kolkataon 7^ March, 2014stating that the statement of Mr. Santosh Kumar Jain was again recorded onFebruary, 2014 in which he retracted from his earlier statement given on10^*^ January,2012 during the course of search. It is stated by the AO that"Mr. Santosh Kumar Jain has stated that during the search he was undertremendous pressure and under pressure he has admitted he has providedaccommodation entry to Minda Group of companies." The AO rejected thesaid retraction and proceeded to make the additions to the taxable income ofthe Assessees. 9. Among the various grounds raised by the Assessee before the CIT (A),one pertained to whethfer in fact the proceedings initiated under Section 1 ITA Nos.502, 503, 505 & 506/2016 153C ofthe Act were valid/The CIT (A) .by the orderdated 9^*" December,2014 rejectedthe said contentionofthe Assessees. As regardsmeritsoftheadditions,the CIT (A) concurredwith the AO and sustainedthe additions.Consequently,the appealswere; dismissed. The appealsof all the Assesseeswere consolidated before the ITAT and the impugned common order waspassed. 10. As already mentioned, this Court considers it necessary only to addressthe issue as to whether what was recovered during the search could beconsidered to be incriminating material qua each of the Assessees. In thatview of the matter, the Court is not answering the other aspects concerningthe validity of the initiation of the proceedings under Section 153C of theAct and, in particular, whether the material which may be relevant to theyear of the search could justify the re-opening of the assessment for theassessments of the earlier years as was done in the present case. 11. It is important to note that in case of each of these Assessees, returnswere filed for the AYs in question. The returns were picked up for scrutinyand the assessment was finalised under Section 143(3) of the Act for each ofthe Assessees for each of the AYs in question. Notice under Section 153C ofthe Act was issued to each of the Assessees nearly two years after the actualsearch of the Minda Group. The copy of the Satisfaction Note prepared bythe AO of the Assessee refers to the 'incriminating'documents/paperswhich were seized during the search and seizure action in the case of theMinda Group. These documents are copies of the balance sheet abstracts andcompany's general profile, balance sheet, profit and loss account, auditor's ITA Nos.502, 503, 505 & 506/2016 Page 6 of8 account,copiesofincometax returnsand copyoftrialbalances. ITA Nos.502, 503, 505 & 506/2016 Page 6 of8 account,copiesofincometax returnsand copyoftrialbalances. 12. Apartfrom the above,therewas no othermaterialreferredto that couldgive rise to the beliefaboutincomehavingescapedassessment.Each oftheabove documents was already available with the AO when the initialassessments were finalised under Section 143(3) of the Act. The Courtenquiredfrom Mr. Shivpuriwhether, iii fact, there was any new or freshmaterial which could form the basis for the AO for re-opening theassessments. Mr. Shivpuri submitted that the trial balances were notavailable earlier. However, he could not deny that it is these very trialbalancesthat ledto the preparationof the balancesheet,whichwere alreadyavailablewith the AO and that there was no new informationcontainedinthe trial balance which justified the additions. 13. Consequently, the Court is of the view that the above documents couldnot constitute incriminating material which could justify the making of theadditions in exercise of the powers under Section 153C of the Act. It hasbeen repeatedly stressed by this Court in several judgments including CIT v.Anil Kumar Bhatia 352 ITRA 493 (Del.); CIT v. Kabul Chawla 380 ITR573 (Del.); Dayawanti through Legal Heir Sunita Gupta v. CIT (2016) 390ITR 496 (Del.) and CIT-VII v. RRJSecuritiesLimited (2016) 380 ITR 612that the seized material must have some nexus or relevanceto the additionssought to be made and must be relevant for the belief formed regardingincome having escaped assessment. While discussing the decision of thisCourt in SSP Aviation Ltd. v. Deputy CIT (2012) 346 ITR 177, this Courtin CIT-VII V. RRJ Securities Limited {supra) noted as under: "35. ... Section 153C only enables the AO of a person other than theone searched, to investigate into the documents seized and/or theassetsseizedand ascertainthat thesamedo not reflectanyundisclosed income of the Assessee (i.e a person other than the onesearched) for the relevant assessment years. If the seized money,bullion,jewellery or other valuablearticle or thing seized as handedover to the AO of the Assessee, are duly disclosed and reflected in thereturns filed by the Assessee, no further interference would be calledfor. Similarly, if the books of accounts/documents seized do notreflectany undisclosedincome,the assessmentsalreadymade cannotbe interferedwith. Merelybecausevaluablearticles and/ordocurnentsbelonging to the Assessee have been seized and handed over to theAO of the Assesseewould not necessarilyrequirethe AO to reopenthe concluded assessments and reassess the income of the Assessee." 14. As far as the present cases are concerned,the documentsand materialseizedare onlythe balancesheet,auditreportsetc.,whichdid notreflectanyincomethat was notdisclosedwhen the assessmentswere finalised alreadyinitiallyunderSection143(3)ofthe Act. This by itselfis sufficientto deletethe additionssustainedby the CIT (A). Consequently,the ITAT was not inerror in ordering such deletion. 15. Forthe aforementionedreasons,the questionframedis answeredin thenegativei.e.,againstthe Revenueand in favourofthe Assessee.The appealsare dismissed but in the circumstances, no orders as to costs. S.MURALIDHAR,J APRIL 24, IQlUb'nesh GRANDER SHEKHAR, J ITA Nos.502, 503, 505 & 506/2016