The provisions of theIncome Tax Act relating to"Tax Deduction at source (TDS)" are of very important in the present scenario when TDS collectionscontribute almost 39% of total collectionof Direct Taxes. The Income Tax Actalso provides for penalty & prosecution for any default in respect of deduction of tax at source or deposit of the deducted amount in the Government account. Thus, the Tax Deductors need to be well conversant with the provisions relating to Tax Deduction at Source as provided in sections 192 to 198 of the Income Tax Act.
The Indian Income Tax Act provides for chargeability of tax on the total income of a person on an annual basis. The quantum of tax determined as per the statutory provisions is payable as:
a) Advance Tax
b) Self Assessment Tax
c) Tax Deducted at Source (TDS)
d) Tax Collected at Source (TCS)
Tax deducted at source (TDS), as name imply aims at collection of revenue at the very source of income. It is an indirect method of collecting tax with the concepts of "collect as it is being earned." Its significance to the government lies in the fact that it pre-pones the collection of tax & to ensures a regular source of revenue.
The concept of TDS requires that the person on whom responsibility has been cast, is to deduct tax at the appropriate rates, from payments of specific nature which are being made to a specified recipient. The deducted sum is required to be deposited to the credit of the Central Government. The recipient from whose income, tax has been deducted at source, gets the credit of the amount deducted in his personal assessment.
This presentation is an attempt to put forth the various provisions on the subject in a lucid yet precise manner.
IT : Awards, rewards, prizes received by amateur sportsperson are not "income" as per CBDT Circular No.447 and hence free from income-tax. These cannot be taxed by invoking the provisions of section 56(2)(v)/(vi)/(vii)
Facts
• In 2008, Assessee- Shri Abhinav Bindra became the first person in the history of independent India to have won the Olympic Gold Medal.
• He was given awards/rewards/prizes mainly by various governments, local authorities, trusts and institutions and of course some corporate/individuals.
• Assessee claimed that he was an amateur sportsperson and hence gifts/awards and prizes won by him are not income in terms of CBDT Circular No.447 dated 22-1-1986.
• AO held that Circular No.447 was inapplicable in view of amendment in section 10(17A) and insertion of section 56(2)(v). However, he allowed exemption in respect of rewards/prizes/gifts from the government, local authorities and trusts/funds recognized under section 10(23C) or registered under section 12AA. He taxed gifts etc received from others-eg corporates, individuals etc by invoking section 56(2)(v).
• CIT(A) enhanced income by adding awards etc received from various governments.
• Aggrieved by CIT(A)'s order, assessee filed instant appeal before ITAT.
Held
• Revenue had not controverted the assessee's contention that he was as amateur sportsman and not a professional sportsman.
• Even after the amendment in section 10(17A) and the insertion of section 56(2)(v), CBDT Circular No.447 has not been withdrawn. The fact that it has not been withdrawn was not controverted.
• As per Circular No.447, in the case of a non-professional sportsman, the award received by him will be in the nature of a gift and/or personal testimonial which will not be liable to tax in his hands as it would not be in the nature of income.
• Question of exemption under section 10(17A) and distinction made by CIT(A) between "award" and "reward" is relevant only when receipt in question is income.
• Also question of taxing a receipt under section 56(2)(v) as income arises only when it has the character of income.
• As Circular No.447 excludes the awards etc received by amateur sportsperson from ambit of "income" in section 2(24), question of considering exemption under section 10(17A) or taxability under section 56(2)(v) does not arise.
• In the result, assessee's appeal allowed.
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[2013] 35 taxmann.com 575 (Delhi - Trib.)
IN THE ITAT DELHI BENCH 'A'
Abhinav Bindra
v.
Deputy Commissioner of Income-tax, Central-2, Dehradun
G.D. AGRAWAL, VICE-PRESIDENT
AND R.P.TOLANI, JUDICIAL MEMBER
AND R.P.TOLANI, JUDICIAL MEMBER
IT APPEAL NO. 2219 (DELHI) OF 2013
[ ASSESSMENT YEAR 2009-10 ]
[ ASSESSMENT YEAR 2009-10 ]
JULY 26, 2013
Ashwani Kumar for the Appellant. Bhim Singh for the Respondent.
ORDER
G.D. Agrawal, Vice-President - This appeal by the assessee is directed against the order of learned CIT(A)-I, Dehradun dated 21st February, 2013 for the Assessment Year 2009-10.
2. The assessee has raised the following grounds of appeal:-
| "1. | That order passed u/s 250(6) of the Income Tax Act, 1961 is against law and facts on the file in as much as the ld. Commissioner of Income Tax (Appeals) was not justified to uphold the action of the ld. Assessing Officer in treating a sum of Rs.63,10,601/- received from various trusts and associations by way of gifts/awards on winning of the Olympic Medal as taxable under the head "Income from other sources" as gifts received under the provisions of section 56(2)(v). | |
| 2. | That he was further not justified to arbitrarily enhance the assessed income by Rs.2,34,00,000/- received by the appellant from various Governments without giving any opportunity before taking such an action. | |
| 3. | That the ld.CIT(A) gravely erred in not adjudicating on the detailed written submissions made during the course of hearing vide which it was submitted that the entire receipts received by the appellant were in the nature of capital receipts. | |
| 4. | That principles of natural justice were grossly violated in as much as neither any reasonable opportunity before enhancing the income was given nor the details written submissions made, were considered while adjudicating the appeal." |
3. The facts of the case are that the assessee is a sportsperson viz., shooter of international repute who won medals in various international events including Asian Games, Commonwealth Games, World Championships and also won gold medal in Olympic Games at Beijing in 2008. During the accounting year relevant to the assessment year under consideration, the assessee received awards/prizes/gifts amounting to Rs.4,81,63,380/- which were divided in four categories as under:-
| From governments | 23400000 |
| From local authority | 500000 |
| From Trust/assessment/funds recognized u/s 10(23C) or registration u/s 12AA of the I.T. Act | 17952779 |
| From other persons | 6310601 |
| Total | 48163380 |
4. Before the Assessing Officer, the assessee claimed that the entire sum of Rs.4,81,63,380/- is not income for which he relied upon the decision of CBDT vide Circular No.447 dated 22nd January, 1986. The Assessing Officer treated the above Circular to be inapplicable because of amendment in Section 10(17A) and insertion of Section 56(2)(v). However, he accepted the receipt of reward/prize/gifts from the government, local authorities and trusts/funds recognized under Section 10(23C) or registered under Section 12AA to be exempt. He, therefore, added the sum of Rs.63,10,601/- to be the income of the assessee under Section 56(2)(v). On appeal, learned CIT(A) enhanced the income by the sum of Rs.2,34,00,000/- being the awards/rewards received from various governments. Hence, this appeal by the assessee.
5. At the outset, the learned counsel for the assessee stated that the assessee is an amateur shooter and, therefore, with regard to rewards/gifts, Circular No.447 would be squarely applicable. He stated that as per the above Circular, a distinction has been made between a sportsman who is a professional sportsman or a non-professional sportsman. In the case of non-professional sportsman, the award received by him will not be in the nature of income. He stated that once as per the Board's Circular, any award received by a sportsman who is not a professional is not income. The question of applicability of Section 10(17A) or 56(2)(v) will not arise because the receipt is not the income under Section 2(24) of the IT Act. Section 10 is applicable in respect of income which does not form part of the total income. Similarly, Section 56 is applicable in respect of income from other sources. Therefore, in respect of all receipt which is not in the nature of income, neither Section 10(17A) is relevant nor Section 56 is relevant. He further stated that the above Circular has not been withdrawn by the CBDT despite amendment in Section 10(17A) and insertion in Section 56(2)(v). Therefore, the same would be applicable. In this regard, he also relied upon the decision of ITAT dated 28th June, 2013 in the case of Shri Kapil Dev rendered in ITA No.4788/Del/2003 and others. He, therefore, submitted that the entire receipt of the assessee by way of gifts/prizes/rewards should be held to be not in the nature of income. Accordingly, the addition made by the Assessing Officer as well as enhancement made by the learned CIT(A) should be deleted.
6. Learned DR, on the other hand, relied upon the order of learned CIT(A) and he stated that the Circular of the CBDT being relied upon by the learned counsel is dated 22nd January, 1986. Much water has flown thereafter and Section 10(17A) has been amended and moreover, Section 56(2)(v) has been inserted by the Finance (No.2) Act of 2004 with effect from 1st April, 2005. The assessment year under consideration is AY 2009-10 and, therefore, Section 56(2)(v) would be squarely applicable. Therefore, after the insertion of Section 56(2)(v), the Circular would not be applicable.
7. In the rejoinder, it is stated by the learned counsel that the Circular No.447 dated 22nd January, 1986 has not been withdrawn so far. If the CBDT would have opined that after the insertion of Section 56(2)(v) the Circular is not applicable, it would have been withdrawn so far because more than eight years have passed since the insertion of Section 56(2)(v). He further submitted that even if it is held that a Circular is contrary to the provision of Section 56(2)(v), still, if some benefit is allowed by the Board's Circular even contrary to the Income-tax Act, the assessee is entitled to the said benefit.
8. We have carefully considered the arguments of both the sides and perused the material placed before us. Circular No.447 dated 22nd January, 1986 reads as under:-
"Subject: Taxability of awards for sportsmen - Clarification regarding.
The Central Board of Direct Taxes had occasion to consider the question whether the award received by a sportsman, who is not a professional, will be taxable in his hands or not. In the case of a sportsman who is a professional, the award received by him will be in the nature of a benefit in exercise of his profession and, therefore, will be liable to tax under the provisions of the Income-tax Act. However, in the case of a non-professional, the award received by him will be in the nature of a gift and/or personal testimonial. In view of this, it is clarified that such awards in the cases of a sportsman, who is not a professional, will not be liable to tax in his hands as it would not be in the nature of income. The question whether a sportsman is a professional or not will depend upon the facts and circumstances of each case to be decided by the assessing officer.
2. In cases where such receipt is in the nature of gift, the chargeability to gift-tax will be considered separately."
9. From the above Circular, it is evident that the CBDT has distinguished between the sportsman who is a professional or who is not a professional. In the case of a professional sportsman, the award received by him will be in the nature of benefit in exercise of his profession and therefore will be liable to tax under the provisions of the Income-tax Act. But, in the case of a non-professional, the award received by him will be in the nature of a gift and/or personal testimonial and it will not be liable to tax in the hands of the sportsman because it would not be in the nature of income. Therefore, the first thing while considering the applicability of the Circular is to consider whether the assessee is a professional sportsman or not a professional sportsman. We find that before the Assessing Officer, the assessee has given a detailed written submission which is reproduced in the assessment order. In the first paragraph itself, which is being reproduced below for ready reference, the assessee has claimed that he is an amateur shooter. He is pursuing it as his hobby and not as a professional sportsman :-
"(1) By way of a brief background it may be mentioned that the assessee Shri Abhinav Bindra is an "Amateur" Shooter of international repute who, by virtue of his skills, honed and perfected after years of sustained hard-work, and perseverance, has brought and won medals at various international events including the Asian Games, Commonwealth Games and World Championships, the crowning glory of which has been the first individual Gold medal ever won by an Indian in the history of Olympic Games at Beijing Olympics in 2008. It is worthwhile, relevant and important to mention here that while this sport is regulated at the national level by the National Rifle Association of India (NRAI) and at the international level by the International Shooting Sports Federation (ISSF), Headquartered at Munich, Germany, shooting retains the character or an amateur sport pursued by individuals as a hobby or passion or by army-men in which case it bears a marked convergence with their career pursuits. Even in the case of the Assessee he was pursuing it as hobby, akin to painting, sculpting, wherein he achieved a high level of perfection after years of dedicated and sustained hard work. At no stage has the Assessee pursued the hobby with the prospect of monetary gain or as a professional of which the possibilities in this sport are virtually non-existent."
10. The above submission made by the assessee before the Assessing Officer has neither been rebutted by the Assessing Officer in the assessment order nor the learned CIT(A) has given any contrary finding. Even at the time of hearing before us, it is not the contention of the Revenue that the assessee, viz., Shri Abhinav Bindra is a professional sportsman. Therefore, we agree with the contention of the learned counsel that the assessee is an amateur sportsman and not a professional sportsman.
11. Now, the second question would be whether the above Circular still holds goof after the amendment in Section 10(17A) and insertion of Section 56(2)(v). It has been stated by the learned counsel that the above Circular has not been withdrawn so far despite the amendment in Section 10(17A) as well as insertion of Section 56(2)(v). This statement made at the bar has not been controverted by the Revenue. Therefore, we proceed with the belief that the above Circular has not been withdrawn. As we have already stated that as per Circular No.447, in the case of a non-professional sportsman, the award received by him will be in the nature of a gift and/or personal testimonial which will not be liable to tax in his hands as it would not be in the nature of income. The learned DR has contended that the above Circular would not be applicable after the modification of Section 10(17A) and 56(2)(v). So far as Section 10 is concerned, this is Chapter III which begins with the heading "Incomes which do not form part of total income". Thus, Section 10 would be applicable in respect of income which is to be excluded because of Section 10. However, in respect of a receipt which is not in the nature of income, the entire Section 10 is not applicable and, therefore, any amendment in Section 10(17A) is of no consequence. So far as Section 56 is concerned, it is under the heading "Income from other sources". Section 56(1) and (2) read as under:-
"56. (1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head "Income from other sources", if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E.
(2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head "Income from other sources", namely :-
(i) dividends ;
[(ia) income referred to in sub-clause (viii) of clause (24) of section 2 ;]
[(ib) income referred to in sub-clause (ix) of clause (24) of section 2 ;]
[(ic) income referred to in sub-clause (x) of clause (24) of section 2, if such income is not chargeable to income-tax under the head "Profits and gains of business or profession";]
[(id) income by way of interest on securities, if the income is not chargeable to income-tax under the head "Profits and gains of business or profession";]
(ii) income from machinery, plant or furniture belonging to the assessee and let on hire, if the income is not chargeable to income-tax under the head "Profits and gains of business or profession";
(iii) where an assessee lets on hire machinery, plant or furniture belonging to him and also buildings, and the letting of the buildings is inseparable from the letting of the said machinery, plant or furniture, the income from such letting, if it is not chargeable to income-tax under the head "Profits and gains of business or profession";
[(iv) income referred to in sub-clause (xi) of clause (24) of section 2, if such income is not chargeable to income-tax under the head "Profits and gains of business or profession" or under the head "Salaries";]
[(v) where any sum of money exceeding twenty-five thousand rupees is received without consideration by an individual or a Hindu undivided family from any person on or after the 1st day of September, 2004 36[but before the 1st day of April, 2006], the whole of such sum :
Provided that this clause shall not apply to any sum of money received-
| (a) | from any relative; or | |
| (b) | on the occasion of the marriage of the individual; or | |
| (c) | under a will or by way of inheritance; or | |
| (d) | in contemplation of death of the payer; or | |
| [(e) | from any local authority as defined in the Explanation to clause (20) of section 10; or | |
| (f) | from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or | |
| (g) | from any trust or institution registered under section 12AA.] |
Explanation.-For the purposes of this clause, "relative" means-
| (i) | spouse of the individual; | |
| (ii) | brother or sister of the individual; | |
| (iii) | brother or sister of the spouse of the individual; | |
| (iv) | brother or sister of either of the parents of the individual; | |
| (v) | any lineal ascendant or descendant of the individual; | |
| (vi) | any lineal ascendant or descendant of the spouse of the individual; | |
| (vii) | spouse of the person referred to in clauses (ii) to (vi);] | |
| [(vi) | where any sum of money, the aggregate value of which exceeds fifty thousand rupees, is received without consideration, by an individual or a Hindu undivided family, in any previous year from any person or persons on or after the 1st day of April, 2006 39[but before the 1st day of October, 2009], the whole of the aggregate value of such sum: |
Provided that this clause shall not apply to any sum of money received-
| (a) | from any relative; or | |
| (b) | on the occasion of the marriage of the individual; or | |
| (c) | under a will or by way of inheritance; or | |
| (d) | in contemplation of death of the payer; or | |
| (e) | from any local authority as defined in the Explanation to clause (20) of section 10; or | |
| (f) | from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or | |
| (g) | from any trust or institution registered under section 12AA. |
Explanation.-For the purposes of this clause, "relative" means-
| (i) | spouse of the individual; | |
| (ii) | brother or sister of the individual; | |
| (iii) | brother or sister of the spouse of the individual; | |
| (iv) | brother or sister of either of the parents of the individual; | |
| (v) | any lineal ascendant or descendant of the individual; | |
| (vi) | any lineal ascendant or descendant of the spouse of the individual; | |
| (vii) | spouse of the person referred to in clauses (ii) to (vi);] | |
| [(vii) | where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009,- |
| (a) | any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum; | |
| [(b) | any immovable property, without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;] |
The following sub-clause (b) shall be substituted for the existing sub-clause (b) of clause (vii) of sub-section (2) of section 56 by the Finance Act, 2013, w.e.f. 1-4-2014 :
(b) any immovable property,-
| (i) | without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property; | |
| (ii) | for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration: |
Provided that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes of this sub-clause:
Provided further that the said proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by any mode other than cash on or before the date of the agreement for the transfer of such immovable property;
(c) any property, other than immovable property,-
| (i) | without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property; | |
| (ii) | for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration : |
Provided that where the stamp duty value of immovable property as referred to in sub-clause (b) is disputed by the assessee on grounds mentioned in sub-section (2) of section 50C, the Assessing Officer may refer the valuation of such property to a Valuation Officer, and the provisions of section 50C and sub-section (15) of section 155 shall, as far as may be, apply in relation to the stamp duty value of such property for the purpose of sub-clause (b) as they apply for valuation of capital asset under those sections :
Provided further that this clause shall not apply to any sum of money or any property received-
| (a) | from any relative; or | |
| (b) | on the occasion of the marriage of the individual; or | |
| (c) | under a will or by way of inheritance; or | |
| (d) | in contemplation of death of the payer or donor, as the case may be; or | |
| (e) | from any local authority as defined in the Explanation to clause (20) of section 10; or | |
| (f) | from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or | |
| (g) | from any trust or institution registered under section 12AA. |
Explanation.-For the purposes of this clause,-
| (a) | "assessable" shall have the meaning assigned to it in the Explanation 2 to sub-section (2) of section 50C; | |
| (b) | "fair market value" of a property, other than an immovable property, means the value determined in accordance with the method as may be prescribed42; | |
| (c) | "jewellery" shall have the meaning assigned to it in the Explanation to sub-clause (ii) of clause (14) of section 2; | |
| (d) | "property" 43[means the following capital asset of the assessee, namely:-] |
| (i) | immovable property being land or building or both; | |
| (ii) | shares and securities; | |
| (iii) | jewellery; | |
| (iv) | archaeological collections; | |
| (v) | drawings; | |
| (vi) | paintings; | |
| (vii) | sculptures; 44[***] | |
| (viii) | any work of art; 45[or] | |
| [(ix) | bullion;] |
| [(e) | "relative" means,- |
| (i) | in case of an individual- |
| (A) | spouse of the individual; | |
| (B) | brother or sister of the individual; | |
| (C) | brother or sister of the spouse of the individual; | |
| (D) | brother or sister of either of the parents of the individual; | |
| (E) | any lineal ascendant or descendant of the individual; | |
| (F) | any lineal ascendant or descendant of the spouse of the individual; | |
| (G) | spouse of the person referred to in items (B) to (F); and |
| (ii) | in case of a Hindu undivided family, any member thereof;] |
| (f) | "stamp duty value" means the value adopted or assessed or assessable by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property;] |
[(viia) where a firm or a company not being a company in which the public are substantially interested, receives, in any previous year, from any person or persons, on or after the 1st day of June, 2010, any property, being shares of a company not being a company in which the public are substantially interested,-
| (i) | without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property; | |
| (ii) | for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration : |
Provided that this clause shall not apply to any such property received by way of a transaction not regarded as transfer under clause (via) or clause (vic) or clause (vicb) or clause (vid) or clause (vii) of section 47.
Explanation.-For the purposes of this clause, "fair market value" of a property, being shares of a company not being a company in which the public are substantially interested, shall have the meaning assigned to it in the Explanation to clause (vii);]
[(viib) where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares:
Provided that this clause shall not apply where the consideration for issue of shares is received-
| (i) | by a venture capital undertaking from a venture capital company or a venture capital fund; or | |
| (ii) | by a company from a class or classes of persons as may be notified by the Central Government in this behalf. |
Explanation.-For the purposes of this clause,-
| (a) | the fair market value of the shares shall be the value- |
| (i) | as may be determined in accordance with such method as may be prescribed48a; or | |
| (ii) | as may be substantiated by the company to the satisfaction of the Assessing Officer, based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, | |
| whichever is higher; |
| (b) | "venture capital company", "venture capital fund" and "venture capital undertaking" shall have the meanings respectively assigned to them in clause (a), clause (b) and clause (c) of 48b[Explanation] to clause (23FB) of section 10;] |
[(viii) income by way of interest received on compensation or on enhanced compensation referred to in clause (b) of section 145A.]"
12. From the above, it is evident that Section 56 is applicable in respect of "income" which is not chargeable to income tax under any of the heads specified in Section 14 Item No. A to E. Section 14 is "Heads of income" and it reads as under:-
"14. Save as otherwise provided by this Act, all income shall, for the purposes of charge of income-tax and computation of total income, be classified under the following heads of income :-
A. - Salaries.
B. - [***]
C. - Income from house property.
D. - Profits and gains of business or profession.
E. - Capital gains.
F. - Income from other sources."
13. Thus, Section 14 provides the various heads under which income has to be computed and Item No. F which is 'income from other sources' is a residuary head i.e. the income which is not assessable under any of the other heads, viz., salary, income from house property and gains from business or profession and capital gains is to be assessed under the head 'income from other sources'. However, for applicability of Section 14 and thereafter Section 56, what is required is the receipt in the nature of income. In Circular No.447, it has been clearly stated "In view of this, it is clarified that such awards in the cases of a sportsman, who is not a professional, will not be liable to tax in his hands as it would not be in the nature of income." Therefore, as per the Circular, the receipt by way of award by a sportsman who is not a professional sportsman will not be in the nature of income. In the order of learned CIT(A), he has distinguished between the words "reward" and "award", of course with reference to Section 10(17A). We have already stated that Section 10(17A) is not applicable where the above Circular is applicable. We further state that if we read the Circular as a whole, it is clear that the purpose of the Circular is to encourage the sportsmen, especially those who are not professional sportsmen.
14. Coming back to the facts of the assessee's case, Shri Abhinav Bindra is the first person in the history of independent India to have won the Olympic Gold Medal. In a country whose population is more than 100 crores, if a sportsman who is not a professional sportsman has won the gold medal for the first time after 60 years of independence of the country and he has been given the awards/rewards/prizes mainly by various governments, local authorities, trusts and institutions and of course some corporate/individuals, a liberal construction of Circular No.447 is required. Considering the facts of the case and the nature and spirit of Circular No.447, we hold that in the case of the assessee, viz., Shri Abhinav Bindra, all the rewards/prizes/gifts received by him are covered by Circular No.447 dated 22nd January, 1986 and, therefore, should not be treated as income in his hands. Accordingly, the addition of Rs.63,10,601/- made by the Assessing Officer and the enhancement of Rs.2,34,00,000/- made by the learned CIT(A) is deleted.
15. In the result, the appeal of the assessee is allowed.
IT : Assessee cannot challenge in writ petition Show Cause Notice issued under section 153C without exhausting remedy of filing replies to it . It is settled law that where an alternate remedy is available to aggrieved party, it must exhaust the same before approaching the Writ Court. If assessee approaches HC by filing writ petition without exhausting the alternate remedy of filing replies to SCN, HC ought not to entertain writ petition but direct assessee to file replies to SCN first
Facts
• Respondent-assessee had purchased land from X.
• There was a search on X. Records and documents seized indicated name of respondent-assessee.
• Seized documents forwarded to AO having jurisdiction over respondent–assessee.
• AO satisfied that income escaped assessment issued 6 Show Cause Notices ('SCN') to respondent -assessee for reassessment of income of AYs 2001-02 to 2006-07.
• Respondent assessee didn't file replies to SCNs to AO but instead challenged SCN s by filing writ petition in HC.
• HC allowed writ petition after examining and interpreting relevant provisions.
• Aggrieved revenue filed the instant appeal to SC.
Held
• Assessee cannot challenge in writ petition Show Cause Notice issued under section 153C without exhausting remedy of filing replies to it.
• It is settled law that where an alternate remedy is available to aggrieved party, it must exhaust the same before approaching the Writ Court.
• If assessee approaches HC by filing writ petition without exhausting the alternate remedy of filing replies to SCN, HC ought not to entertain writ petition but direct assessee to file replies to SCN first.
• In the result, impugned judgement and order of HC set aside without expressing any opinion on correctness of interpretation of provisions by HC.
• Assessee allowed time of 15 days to file replies/objections to AO against SCNs.
• AO to deal with assessee's objections uninfluenced by HC order disposing of the writ petition.
• If assessee aggrieved by assessment order, he shall avail and exhaust remedies available under the Income-tax Act, 1961.
• Appeal disposed of accordingly and no order as to costs.
■■■
[2013] 35 taxmann.com 580 (SC)
SUPREME COURT OF INDIA
Commissioner of Income-tax, Gujarat
v.
Vijaybhai N. Chandrani
H.L. DATTU AND DIPAK MISRA, JJ.
CIVIL APPEAL NOS. 5888 TO 5903 OF 2013
JULY 18, 2013
Arijit Prasad, Sahil Tagotra, B.V. Balaram Das and Mrs. Anil Katiyar for the Petitioner. Amar Dave, Vikramaditya Bhaskar, P.S. Sudheer, D.N. Ray, Lokesh Choudhary, Mrs. Sumita Ray and Rahul Gupta for the Respondent.
ORDER
1. Delay in filing and refiling Special Leave Petitions is condoned.
2. Leave granted.
C.A. No. 5888 of 2013 @ S.L.P. (C) No. 8947 of 2011 :
3. This appeal is directed against the judgment and order passed by the High Court of Gujarat in S.C.A. No.13787 of 2009, dated 30.03.2010, whereby and whereunder the High Court has set aside the Show Cause Notices issued by the Assessing Authority under Section 153C of the Income Tax Act, 1961 (for short 'the Act, 1961'), dated 07.10.2009.
4. Brief facts of the case are:
The respondent-assessee purchased a plot of land from "Samutkarsh Co-operative Housing Society" (for short 'the Society') being developed by one Savvy Infrastructure Ltd. In 2008, a search was conducted under Section 132 of the Act, 1961 in the premises of the Society and also at the office of Savvy Infrastructure Ltd. During the search certain documents were seized under Section 132A of the Act, 1961. Upon scrutiny, it was found that the seized documents reflected names of certain individuals including the assessee. Accordingly, for further proceedings the Assessing Authority had transmitted the seized documents to the jurisdictional Assessing Authority in whose jurisdiction the assessee was being assessed. After receipt of the said information/documents, the Assessing Authority has recorded a satisfaction note dated 06.10.2009, that, he has reason to believe that a case of escapement of income may exist and therefore the assessee's case requires to be reassessed for assessment years 2001-2002 to 2006-2007 under Section 153C of the Act, 1961. The relevant paragraphs of the said satisfaction note read as under:
"SATISFACTION NOTE FOR INITIATION OF PROCEEDINGS U/S. 153C OF THE INCOME TAX ACT, 1961
Name of the assessee : Shri Vijay H. Chandrani
AY : 2001-02 to 2006-07
U/s. 153C and 2007-08 U/s. 143(3).
The DCIT Central Circle 1(1) Ahmedabad, vide his letter DCIT/CC.1 (1)/Vijay Chandrani/Samutkarsh dated 30.03.2009 had intimated ITO Ward 7(4) Ahmedabad that the above mentioned assessee is one of member of the Co-op. Society namely Samutkarsh Co-op. Housing Society, the case of Samutkarsh Co-op. Housing Society as well as in the case of Sa' Infrastructure Ltd., Ahmedabad, proceedings U/s. 132 were carried out by department. During the course of search, certain incriminating document pertaining to the assessee were also found......"
5. Accordingly, the Assessing Authority has issued six Show Cause Notices under Section 153C of the Act, 1961 to the assessee for reassessment of income of the aforesaid six assessment years and directed him to furnish return of income in respect of the said assessment years in prescribed form within thirty days of the receipt of the said notices, dated 07.10.2009.
6. Upon receipt of the said notice, the assessee by letter dated 11.11.2009 requested the Assessing Authority to furnish him with the copies of seized documents on the basis of which the said notices were issued. The Assessing Authority had provided the said documents to the assessee, whereafter the assessee has approached the High Court in a Writ Petition questioning the six Show Cause Notices dated 07.10.2009.
7. The High Court has elaborately examined the case at hand and delved into the statutory scheme for assessment in case of search and requisition as prescribed under Sections 153A, 153B and 153C of the Act, 1961 and reached the conclusion that the documents seized by the Assessing Authority under Section 132A do not belong to the assessee and therefore the condition precedent for issuance of the notice under Section 153C is not fulfilled. Accordingly the High Court has allowed the Writ Petition filed by the assessee and quashed the said notices issued by the Assessing Authority by the impugned judgment and order.
8. Aggrieved by the aforesaid judgment and order passed by the High Court, the Assessing Authority is before us in this appeal.
9. We have heard Shri Prasad, learned counsel for the Assessing Authority and Shri Amar Dave, learned counsel appearing for the respondent at considerable length.
10. Shri Prasad besides questioning the impugned judgment and order on merits would also submit that the High Court ought not to have entertained the Writ Petition filed by the assessee against the Show Cause Notices issued by the Assessing Authority under Section 153C.
11. Au contraire Shri Amar Dave justifies the impugned judgment and order.
12. We have gone through the documents on record including the satisfaction note recorded by the Assessing Authority and the Show Cause Notices. We have also perused the impugned judgment and order of the High Court.
13. In the instant case, it transpires from the record that the jurisdictional Assessing Authority, upon having a reason to believe that the documents seized indicate escapement of income, has issued Show Cause Notices under Section 153C to the assessee for reassessment of his income during the assessment years 2001-2002 to 2006-2007. Thereafter, upon request of the assessee, the Assessing Authority has furnished him with the copies of documents seized under Section 132A. The assessee being dissatisfied with the said documents instead of filing his explanation/reply to the Show Cause Notices, has filed a Writ Petition before the High Court impugning the said notices.
14. In our considered view, at the said stage of issuance of the notices under Section 153C, the assessee could have addressed his grievances and explained his stand to the Assessing Authority by filing an appropriate reply to the said notices instead of filing the Writ Petition impugning the said notices. It is settled law that when an alternate remedy is available to the aggrieved party, it must exhaust the same before approaching the Writ Court. In Bellary Steels & AlloysLtd. v. CCT [2009] 17 SCC 547, this Court had allowed the assessee therein to withdraw the original Writ Petition filed before the High Court as the said proceedings came to be filed against the show-cause notice and observed that the High Court should not have interfered in the matter as the Writ Petition was filed without even reply to the show cause notice. This Court further observed as follows:
"3. .…In the circumstances, we could have dismissed these civil appeals only on the ground of failure to exhaust statutory remedy, but for the fact that huge investments involving the large number of industries is in issue."
15. We are fortified by the decision of this Court in Indo Asahi Glass Co. Ltd. v. ITO [2002] 10 SCC 444, wherein the assessee had approached this Court against the judgment and order of the High Court which had dismissed the Writ Petition filed by the assessee wherein challenge was made to the show cause notice issued by the Assessing Authority on the ground that alternative remedy was available to the assessee. This Court concurred with the findings and conclusions reached by the High Court and dismissed the said appeal with the following observations:
"5. This and the other facts cannot be taken up for consideration by this Court for the first time. In our opinion, the High Court was right in coming to the conclusion that it is appropriate for the appellants to file a reply to the show-cause notice and take whatever defence is open to them."
16. In the present case, the assessee has invoked the Writ jurisdiction of the High Court at the first instance without first exhausting the alternate remedies provided under the Act. In our considered opinion, at the said stage of proceedings, the High Court ought not have entertained the Writ Petition and instead should have directed the assessee to file reply to the said notices and upon receipt of a decision from the Assessing Authority, if for any reason it is aggrieved by the said decision, to question the same before the forum provided under the Act.
17. In view of the above, without expressing any opinion on the correctness or otherwise of the construction that is placed by the High Court on Section 153C, we set aside the impugned judgment and order. Further, we grant time to the assessee, if it so desires, to file reply/objections, if any, as contemplated in the said notices within 15 days' time from today. If such reply/objections is/are filed within time granted by this Court, the Assessing Authority shall first consider the said reply/objections and thereafter direct the assessee to file the return for the assessment years in question. We make it clear that while framing the assessment order, the Assessing Authority will not be influenced by any observations made by the High Court while disposing of the Writ Petition. If, for any reason, the assessment order goes against the assessee, he/it shall avail and exhaust the remedies available to him/it under the Act, 1961.
18. The appeal is disposed of accordingly. No costs.
C.A. NO. 5896 OF 2013 @ S.L.P. (C) NO. 29038/2011,
WITH C.A. NO. 5897 OF 2013 @ S.L.P. (C) NO. 29039/2011
WITH C.A. NO. 5898 OF 2013 @ S.L.P. (C) NO. 29040/2011
WITH C.A. NO. 5899 OF 2013 @ S.L.P. (C) NO. 31248/2011
WITH C.A. NO. 5900 OF 2013 @ S.L.P. (C) NO. 32912/2011
WITH C.A. NO. 5901 OF 2013 @ S.L.P. (C) NO. 34009/2011
WITH C.A. NO. 5902 OF 2013 @ S.L.P. (C) NO. 34010/2011
WITH C.A. NO. 5889 OF 2013 @ S.L.P. (C) NO. 113/2012
WITH C.A. NO. 5890 OF 2013 @ S.L.P. (C) NO. 114/2012
WITH C.A. NO. 5903 OF 2013 @ S.L.P. (C) NO. 8502/2012
WITH C.A. NO. 5891 OF 2013 @ S.L.P. (C) NO. 12900/2012
WITH C.A. NO. 5892 OF 2013 @ S.L.P. (C) NO. 19991/2012
WITH C.A. NO. 5893 OF 2013 @ S.L.P. (C) NO. 21295/2012
WITH C.A. NO. 5894 OF 2013 @ S.L.P. (C) NO. 21340/2012
AND
WITH C.A. NO. 5895 OF 2013 @ S.L.P. (C) NO. 24322/2012:
19. These appeals arise from the judgment and orders passed by the High Court of Gujarat in Tax Appeal Nos.2085 of 2009, 2082 of 2009, 2078 of 2009, 2083 of 2009, 2080 of 2009, 2077 of 2009, 2086 of 2009, 2084 of 2009, 2079 of 2009, dated 27.04.2011 and Tax Appeal No.444 of 2010, 445 of 2010, 2081 of 2009, dated 26.07.2011, 2081 of 2009, dated 27.04.2011, 1498 of 2010, dated 21.12.2011, 449 of 2010, dated 26.07.2011 and 1493 of 2010, dated 21.12.2011 respectively.
20. In these appeals the Tribunal and the High Court, after going through the facts and circumstances of each case, have reached the conclusion that the Assessing Authority was not justified in computing the assessments and thereafter fastening liability on the assessee to pay tax and interest. Since these appeals are primarily decided on facts by the First Appellate Authority, the Tribunal and the High Court, we do not find any substantial question of law which requires to be decided by this Court.
21. We make it abundantly clear that we have not expressed any opinion on the correctness or otherwise of the observations made by the High Court insofar as the interpretation of Section 153C of the Act, 1961 is concerned. The said question is kept open to be agitated in an appropriate matter.
22. Accordingly, all these appeals are disposed of with no order as to costs.
ORDER
Delay in filing and refiling Special Leave Petitions is condoned.
Leave granted.
Appeals are disposed of with no order as to costs, in terms of the signed order.
Cus - Revenue cannot retain any amount to which it is legally not entitled to as same would be violative of Article 265 – DRI directed to return Rs 8 Cr to petitioner within two weeks: HC
By TIOL News Service
CHANDIGARH, JULY 27, 2013: THE petitioner is before the High Court praying for the return of Rs. 10 Crores allegedly illegally recovered from the petitioners by the DRI forcibly and under coercion on 26 th April, 2012 inasmuch as there is no existing liability outstanding against the petitioners. It is also submitted that only one show cause notice has been issued with respect to the consignment which was lying at Inland Container Depot, New Delhi for which the maximum liability for about Rs. 50 lakhs could be fastened and in such a situation retention of Rs. 10 Crores was unjustified.
Reliance is placed on the observations of the Division Bench in Bhagwati International Vs. UOI 2005 (190) ELT 300 (P & H) and paras 11 to 13 in M/s Century Metal Recycling Pvt. Ltd. versus Union of India (2008-TIOL-711-HC-P&H -CX).
While opposing the prayer of the petitioners, the counsel for the Respondent DRI submitted that the petitioners were not entitled for the return of the aforesaid amount in view of the Constitution Bench Judgment in Suganmal versus State of M.P. and others, AIR 1965 SC 1740 as the writ petition itself was not competent. It was urged that the petitioners had voluntarily deposited the amount on 26th April, 2012 and, thus, there was no occasion for the petitioners to seek return of the same in the absence of any changed circumstances. It is further submitted that the aforesaid amount is required to be retained to safeguard the interest of the revenue. It was also pointed out that a show cause notice has been issued and further investigations and proceedings against the petitioners are going on in which the liability to the tune of Rs. 60 Crores could be fastened on the petitioners; that if interest and mandatory penalties are also added to the aforesaid amount, the total liability would be of about Rs. 100 to 120 Crores.
In rebuttal, the petitioners placed reliance upon U.P. Pollution Control Board and others versus Kanoria Industrial Limited and another, (2001) 2SCC 549 , ABL International Limited and another versus Export Credit Guarantee Corporation of India Limited and others, (2004) 3 SCC 553 and Godavari Sugar Mills Limited versus State of Maharashtra and others, (2011) 2 SCC 439 to controvert that in the aforesaid cases the apex Court had distinguished the Constitution Bench judgment in Suganmal's case by noticing that though normally writ of mandamus would not be entertained for the purpose of merely ordering of refund of money but the High Court had the powers to pass appropriate orders in exercise of jurisdiction under Article 226 of the Constitution of India in appropriate cases.
The petitioner also agreed for retaining of an amount of Rs. 2 Crores by the revenue till the finalization of the proceedings in pursuance to SCN already issued and also accepted that immovable property of plot valuing approximately Rs. 3 Crores belonging to the wife of petitioner which is free from all encumbrances as on date, would also not be alienated or any encumbrance would be created by the petitioners for a period of one year, during which, a direction may be issued to the respondents to conclude all proceedings in respect of ongoing investigations, if any, or show cause notice which has been issued.
The High Court accepted this submission and directed that the plot in respect of the petitioner has made a statement, no encumbrance shall be created or the aforesaid property shall not be alienated for a period of one year i.e. till 31st March, 2014 or till the finalization of the proceedings, whichever is earlier.
The High Court also observed that the objection of the respondent DRI regarding maintainability of writ petition does not merit acceptance in view of the judgments cited by the petitioner inasmuch as it is not in absolute terms that a writ petition for refund/return of the amount would be barred under Article 226 of the Constitution; in appropriate case, the writ court keeping in view the facts and circumstances can pass order as deemed fit.
As for the return of the amount sought by the petitioner, the High Court observed -
+ We find that as on date no crystalized liability has been shown to be existing against the petitioners. Further, only a show cause notice has been issued whereunder a liability to the extent of Rs. 50 lacs could be fastened. Insofar, as the matters which are under investigations, it has not been shown that any show cause notice in respect thereof has been issued by the respondent-department so far.+ It is trite law that unless a demand, which is finalized and is existing which is liable to be discharged, the revenue cannot retain any amount unless there exists specific provision in the statute for the retention of the amount.+ On a specific query put to the learned counsel for the revenue relating to any provision in the statute on the basis of which the revenue could provisionally retain the amount, learned counsel for the revenue candidly admitted that there is no such provision to retain the amount except to refer to Section 142 of the Customs Act, 1962.+ On a query as to whether any order requiring the petitioners to refund the duty draw back as canvassed by the revenue had been passed, learned counsel for the revenue was unable to show that there existed any such order or authorization from any competent authority. It was only urged that it was a disputed question of fact as to whether the amount was deposited voluntarily or under coercion. Be that as it may, whatever be the situation, the revenue cannot retain any amount to which it is legally not entitled to as the same would be violative of Article 265 of the Constitution of India.
Accordingly, the High Court while directing the revenue to retain an amount of Rs. 2 Crores to safeguard its interest for being adjusted against any liability that might be created on the basis of investigations and/or show cause notice issued to the petitioners also directed that they return the balance amount of Rs. 8 Crores within a period of two weeks. It was further emphasized that in case the liability on the basis of the investigations and/or show cause notice issued to the petitioners is less than the amount retained, the respondent DRI should return the balance amount immediately on finalization of those proceedings.
The Petitioner was directed to co-operate and the Revenue was directed to make sincere efforts for completing the investigations and finalizing the proceedings on or before 31st March, 2014.
The petition was disposed of accordingly.
(See 2013-TIOL-580-HC-P&H-CUS)
2013-TIOL-647-ITAT-AGRA
IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH, AGRA
BENCH, AGRA
ITA Nos.369, 339, 340 & 341/Agra/2012
Assessment Years: 2004-05, 2005-06, 2006-07 & 2007-08
Assessment Years: 2004-05, 2005-06, 2006-07 & 2007-08
HARDEVI KESHWANI
92, SURYA NAGAR, AGRA
92, SURYA NAGAR, AGRA
Vs
ASSTT COMMISSIONER OF INCOME TAX
CENTRAL CIRCLE, AGRA
CENTRAL CIRCLE, AGRA
Bhavnesh Saini, JM and A L Gehlot, AM
Dated: May 31, 2013
Appellant Rep by: Shri Pankaj Gargh, Adv.
Respondent Rep by: Shri Waseem Arshad, Sr. DR
Respondent Rep by: Shri Waseem Arshad, Sr. DR
Income Tax – Sections 132(1), 153C – Whether AO can invoke the jurisdiction u/s. 153C of the Act without recording any satisfaction that any seized documents or material belonged to any person other than the person searched.
The case pertains to Shanker Gutka group, in which search and seizure operations were conducted u/s. 132(1) of the Act on 31.01.2008.Thereafter, the proceedings u/s. 153C read with section 153A were initiated and after considering the material available on record and submissions of the assessee, the AO made additions on account of income from house property on determining the Annual letting value of the property at 7% of the investments and made the additions of Rs.77,433/-. In AY 2004-05, the AO also made addition of Rs.5,00,000/- on account of unexplained gift, which has been deleted by the CIT(A) vide order dated 05.03.2012.
The assessee challenged initiation and validity of proceedings u/s. 153C and addition on merits before the CIT(A). The assessee briefly explained that no action u/s. 132 of the IT Act has been taken in the case of assessee. The assessee's source of income is mainly income, which is assessed under the head 'income from other sources'. Search was conducted and Panchnama was drawn in the name of her husband, father-in-law and brother of her husband. No adverse or incriminating material was found as a result of search which can be made the basis for AO to have satisfied that the income relating to the assessee, has been unearthed during the search. Even the satisfaction recorded, if any, which is a pre-requisite condition for the initiation of proceedings and the issue of notice u/s. 153C of the IT Act has neither been mentioned in the assessment order nor has been supplied to the assessee. In the absence of the same, it cannot be said that any undisclosed income relating to the assessee has been found during the course of search. The action u/s. 153C of the IT Act in the case of another person can only be taken if any incriminating material reflecting undisclosed income is found during the course of search. In the case of assessee since no material found during the course of search, against the assessee, therefore, notice issued u/s. 153C is invalid and consequent assessment made u/s. 153C read with section 143(3) of the IT Act deserves to be quashed. The CIT(A), however, rejected the contention of the assessee and decided the issue against the assessee. The appeal of the assessee on merit of determination of Annual Letting Value was also dismissed.
On further appeal, the ITAT held that,
++ the issue is squarely covered in favour of the assessee by order of ITAT, Agra Bench in the case of ACIT Circle I, Gwalior vs. M/s. Global Estate (2013-TIOL-55-ITAT-AGRA), in which on the identical issue, departmental appeal has been dismissed;
++ it is clear that no search was conducted against the assessee u/s. 132 of the IT Act, therefore, proceedings u/s. 153C have been initiated. The AO did not make any addition against the assessee on the basis of any adverse material. The AO passed the assessment order u/s. 153C of the IT Act making addition of Rs.77,433/- on account of determination of Annual Letting Value u/s. 23(4) of the IT Act of the property at 7% of investments. The determination of Annual Letting Value is only on notional basis and for that, no incriminating material was found against the assessee. No material is produced to prove that the AO in the case of person searched was satisfied that any money, bullion, jewellery or other valuable articles or things or books of account or documents seized or requisition belongs to or belonging to a person other than the person referred to in section 153A. No material is produced before us to show if any satisfaction was recorded by the AO in that case that the seized material belongs to any person other than the person with respect to whom search was made u/s. 132 of the IT Act. The DR was directed to file copy of the satisfaction note recorded by the AO for initiating the proceedings u/s. 153C of the IT Act. However, the DR did not produce any satisfaction note u/s. 153C or any material to show if any such satisfaction as required u/s. 153C was recorded by the AO in the case of person searched. No material is produced in reference to the above requirement. No material is also produced to show that the books of account or documents or assets seized had been handed over to the AO having jurisdiction over such other person. In the absence of any material produced, the contention of the assessee was justified that in this case the AO has not recorded any satisfaction that any seized documents or material belongs to any person other than the person searched. Therefore, necessary ingredients of section 153C have not been complied with in this case before invoking the jurisdiction u/s. 153C of the IT Act. We may also add here that the AO has not referred to any seized documents or material in the assessment orders on the basis of which notional Annual Letting Value was determined. Therefore, conditions of section 153C are not satisfied in this case. Considering the above discussion, there is no justification to sustain the proceedings u/s. 153C initiated by the authorities below against the assessee. Accordingly, the orders of the authorities below was set aside and quashed the proceedings u/s. 153C of the IT Act. Therefore, all the additions made in the assessment orders u/s. 153C would stand deleted.
The case pertains to Shanker Gutka group, in which search and seizure operations were conducted u/s. 132(1) of the Act on 31.01.2008.Thereafter, the proceedings u/s. 153C read with section 153A were initiated and after considering the material available on record and submissions of the assessee, the AO made additions on account of income from house property on determining the Annual letting value of the property at 7% of the investments and made the additions of Rs.77,433/-. In AY 2004-05, the AO also made addition of Rs.5,00,000/- on account of unexplained gift, which has been deleted by the CIT(A) vide order dated 05.03.2012.
The assessee challenged initiation and validity of proceedings u/s. 153C and addition on merits before the CIT(A). The assessee briefly explained that no action u/s. 132 of the IT Act has been taken in the case of assessee. The assessee's source of income is mainly income, which is assessed under the head 'income from other sources'. Search was conducted and Panchnama was drawn in the name of her husband, father-in-law and brother of her husband. No adverse or incriminating material was found as a result of search which can be made the basis for AO to have satisfied that the income relating to the assessee, has been unearthed during the search. Even the satisfaction recorded, if any, which is a pre-requisite condition for the initiation of proceedings and the issue of notice u/s. 153C of the IT Act has neither been mentioned in the assessment order nor has been supplied to the assessee. In the absence of the same, it cannot be said that any undisclosed income relating to the assessee has been found during the course of search. The action u/s. 153C of the IT Act in the case of another person can only be taken if any incriminating material reflecting undisclosed income is found during the course of search. In the case of assessee since no material found during the course of search, against the assessee, therefore, notice issued u/s. 153C is invalid and consequent assessment made u/s. 153C read with section 143(3) of the IT Act deserves to be quashed. The CIT(A), however, rejected the contention of the assessee and decided the issue against the assessee. The appeal of the assessee on merit of determination of Annual Letting Value was also dismissed.
On further appeal, the ITAT held that,
++ the issue is squarely covered in favour of the assessee by order of ITAT, Agra Bench in the case of ACIT Circle I, Gwalior vs. M/s. Global Estate (2013-TIOL-55-ITAT-AGRA), in which on the identical issue, departmental appeal has been dismissed;
++ it is clear that no search was conducted against the assessee u/s. 132 of the IT Act, therefore, proceedings u/s. 153C have been initiated. The AO did not make any addition against the assessee on the basis of any adverse material. The AO passed the assessment order u/s. 153C of the IT Act making addition of Rs.77,433/- on account of determination of Annual Letting Value u/s. 23(4) of the IT Act of the property at 7% of investments. The determination of Annual Letting Value is only on notional basis and for that, no incriminating material was found against the assessee. No material is produced to prove that the AO in the case of person searched was satisfied that any money, bullion, jewellery or other valuable articles or things or books of account or documents seized or requisition belongs to or belonging to a person other than the person referred to in section 153A. No material is produced before us to show if any satisfaction was recorded by the AO in that case that the seized material belongs to any person other than the person with respect to whom search was made u/s. 132 of the IT Act. The DR was directed to file copy of the satisfaction note recorded by the AO for initiating the proceedings u/s. 153C of the IT Act. However, the DR did not produce any satisfaction note u/s. 153C or any material to show if any such satisfaction as required u/s. 153C was recorded by the AO in the case of person searched. No material is produced in reference to the above requirement. No material is also produced to show that the books of account or documents or assets seized had been handed over to the AO having jurisdiction over such other person. In the absence of any material produced, the contention of the assessee was justified that in this case the AO has not recorded any satisfaction that any seized documents or material belongs to any person other than the person searched. Therefore, necessary ingredients of section 153C have not been complied with in this case before invoking the jurisdiction u/s. 153C of the IT Act. We may also add here that the AO has not referred to any seized documents or material in the assessment orders on the basis of which notional Annual Letting Value was determined. Therefore, conditions of section 153C are not satisfied in this case. Considering the above discussion, there is no justification to sustain the proceedings u/s. 153C initiated by the authorities below against the assessee. Accordingly, the orders of the authorities below was set aside and quashed the proceedings u/s. 153C of the IT Act. Therefore, all the additions made in the assessment orders u/s. 153C would stand deleted.
Assessee's appeal allowed
ORDER
Per: Bhavnesh Saini:
All the above appeals by the same assessee are directed against the different orders of ld. CIT(A)-I, Agra dated 05.03.2012 & 30.01.2012 for the assessment years 2004-05, 2005-06, 2006-07 and 2007-08.
2. In all the appeals, the assessee has challenged the initiation of proceedings u/s. 153C of the IT Act, as no paper, document or any adverse material relating to assessment years were found during the search. The assessee also on merits challenged the orders of the ld. CIT(A) in confirming the additions of Rs.77,433/- on account of determination of Annual Letting Value u/s. 23(4) of the IT Act of the properties at 7% of investments.
3. Briefly, the facts of the case are that the cases pertain to Shanker Gutka group, in which search and seizure operations were conducted u/s. 132(1) of the IT Act on 31.01.2008.Thereafter, the proceedings u/s. 153C read with section 153A were initiated and after considering the material available on record and submissions of the assessee, the AO made additions on account of income from house property on determining the Annual letting value of the property at 7% of the investments and made the additions of Rs.77,433/-. It may be noted here that in assessment year 2004-05, the AO also made addition of Rs.5,00,000/- on account of unexplained gift, which has been deleted by the ld. CIT(A) vide order dated 05.03.2012. Nothing is brought to our notice if department have challenged this finding of the ld. CIT(A) in any appeal.
4. The assessee challenged initiation and validity of proceedings u/s. 153C and addition on merits before the ld. CIT(A).The written submission of the assessee is incorporated in the appellate order in which the assessee briefly explained that no action u/s. 132 of the IT Act has been taken in the case of assessee. The assessee's source of income is mainly income, which is assessed under the head 'income from other sources'. Search was conducted and Panchnama was drawn in the name of her husband, father-in-law and brother of her husband. No adverse or incriminating material was found as a result of search which can be made the basis for AO to have satisfied that the income relating to the assessee, has been unearthed during the search. Even the satisfaction recorded, if any, which is a pre-requisite condition for the initiation of proceedings and the issue of notice u/s. 153C of the IT Act has neither been mentioned in the assessment order nor has been supplied to the assessee. In the absence of the same, it cannot be said that any undisclosed income relating to the assessee has been found during the course of search. The action u/s. 153C of the IT Act in the case of another person can only be taken if any incriminating material reflecting undisclosed income is found during the course of search. In the case of assessee since no material found during the course of search, against the assessee, therefore, notice issued u/s. 153C is invalid and consequent assessment made u/s. 153C read with section 143(3) of the IT Act deserves to be quashed. The assessee relied upon certain decisions in support of her contention. The ld. CIT(A), however, rejected the contention of the assessee and decided the issue against the assessee. The appeal of the assessee on merit of determination of Annual Letting Value was also dismissed.
5. The ld. counsel for the assessee reiterated the submissions made before the authorities below and submitted that no search has been conducted in the name of the assessee u/s. 132 of the IT Act, therefore, the proceedings u/s. 153C have been initiated and the assessment orders are also passed u/s. 153C of the IT Act. He has submitted that since no material is found against the assessee during the course of search of other persons and no satisfaction has been recorded before initiating the proceedings u/s. 153C of the IT Act, therefore, initiation of proceedings u/s. 153C is illegal and bad in law. Vide order dated 30.11.2012, the ld. DR was directed to file satisfaction note of the AO. Further time was extended for complying with the above order. However, no satisfaction note u/s. 153C has been produced before us. During the course of hearing, the ld. DR submitted that no formal satisfaction note has been recorded in this case u/s. 153C of the IT Act for initiating the proceedings against the assessee u/s. 153C of the IT Act. The ld. DR, however, relied upon the orders of the authorities below.
6. We have considered the rival submissions and the material available on record and find that the issue is squarely covered in favour of the assessee by order of ITAT, Agra Bench in the case of ACIT Circle I, Gwalior vs. M/s. Global Estate in ITA No. 144 to 149/2011 = (2013-TIOL-55-ITAT-AGRA), assessment years 2003-04 to 2008-09 dated 30.11.2012, in which on the identical issue, departmental appeal has been dismissed. The findings in para 9 to 9.7 of this order are reproduced as under :
"9. We have considered the rival submissions and the material available on record. Section 153A, 153B and 153C of the IT Act provides :-"Assessment in case of search or requisition.153A. Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall-(a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139;(b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made :Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years:Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate.Explanation.-For the removal of doubts, it is hereby declared that,-(i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section;(ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year.153B. (1) Notwithstanding anything contained in section 153, the Assessing Officer shall make an order of assessment or reassessment,-(a) in respect of each assessment year falling within six assessment years referred to in clause (b) of section 153A, within a period of two years from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed;(b) in respect of the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A, within a period of two years from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed :[Provided that in case of other person referred to in section 153C, the period of limitation for making the assessment or reassessment shall be the period as referred to in clause (a) or clause (b) of this subsection or one year from the end of the financial year in which books of account or documents or assets seized or requisitioned are handed over under section 153C to the Assessing Officer having Provided further that in the case where the last of the authorisations for search under section 132 or for requisition under section 132A was executed during the financial year commencing on the 1st day of April, 2004 or any subsequent financial year,-(i) the provisions of clause (a) or clause (b) of this sub-section shall have effect as if for the words "two years" the words "twentyone months" had been substituted;(ii) the period of limitation for making the assessment or reassessment in case of other person referred to in section 153C, shall be the period of twenty-one months from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed or nine months from the end of the financial year in which books of account or documents or assets seized or requisitioned are handed over under section 153C to the Assessing Officer having jurisdiction over such other person, whichever is later :][Provided also that in case where the last of the authorisations for search under section 132 or for requisition under section 132A was executed during the financial year commencing on the 1st day of April, 2005 or any subsequent financial year and during the course of the proceedings for the assessment or reassessment of total income, a reference under sub-section (1) of section 92CA-(i) was made before the 1st day of June, 2007 but an order under sub-section (3) of section 92CA has not been made before such date; or(ii) is made on or after the 1st day of June, 2007, the provisions of clause (a) or clause (b) of this sub-section shall, notwithstanding anything contained in clause (i) of the second proviso, have effect as if for the words "two years", the words "thirty three months" had been substituted:Provided also that in case where the last of the authorisations for search under section 132 or for requisition under section 132A was executed during the financial year commencing on the 1st day of April, 2005 or any subsequent financial year and during the course of the proceedings for the assessment or reassessment of total income in case of other person referred to in section 153C, a reference under sub-section (1) of section 92CA-(i) was made before the 1st day of June, 2007 but an order under sub-section (3) of section 92CA has not been made before such date; or(ii) is made on or after the 1st day of June, 2007,the period of limitation for making the assessment or reassessment in case of such other person shall, notwithstanding anything contained in clause (ii) of the second proviso, be the period of thirty-three months from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed or twenty-one months from the end of the financial year in which books of account or documents or assets seized or requisitioned are handed over under section 153C to the Assessing Officer having jurisdiction over such other person, whichever is later.]Explanation.-In computing the period of limitation for the purposes of this section,-(i) the period during which the assessment proceeding is stayed by an order or injunction of any court; or(ii) the period commencing from the day on which the Assessing Officer directs the assessee to get his accounts audited under subsection (2A) of section 142 and ending on the day on which the assessee is required to furnish a report of such audit under that subsection; or(iii) the time taken in reopening the whole or any part of the proceeding or in giving an opportunity to the assessee of being reheard under the proviso to section 129; or(iv) in a case where an application made before the Settlement Commission under section 245C is rejected by it or is not allowed to be proceeded with by it, the period commencing from the date on which such application is made and ending with the date on which the order under sub-section (1) of section 245D is received by the Commissioner under sub-section (2) of that section, 55[or][(v) the period commencing from the date on which an application is made before the Authority for Advance Rulings under sub-section (1) of section 245Q and ending with the date on which the order rejecting the application is received by the Commissioner under subsection (3) of section 245R, or(vi) the period commencing from the date on which an application is made before the Authority for Advance Rulings under sub-section (1) of section 245Q and ending with the date on which the advance ruling pronounced by it is received by the Commissioner under subsection (7) of section 245R,]shall be excluded :Provided that where immediately after the exclusion of the aforesaid period, the period of limitation referred to in clause (a) or clause (b) of this section* available to the Assessing Officer for making an order of assessment or reassessment, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly.(2) The authorisation referred to in clause (a) and clause (b) of subsection (1) shall be deemed to have been executed,-(a) in the case of search, on the conclusion of search as recorded in the last panchnama drawn in relation to any person in whose case the warrant of authorisation has been issued;(b) in the case of requisition under section 132A, on the actual receipt of the books of account or other documents or assets by the Authorised Officer.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 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 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 subsection (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."]9.1 Hon'ble Supreme Court in the case of Manish Maheshwari vs. ACIT and others, 289 ITR 341 = (2007-TIOL-24-SC-IT) considering the earlier provisions of section 158BD of the IT Act (analogous to sec.153C of IT Act) held that -"The condition precedent for invoking a block assessment is that a search has been conducted under section 132, or documents or assets have been requisitioned under section 132A. the said provision would apply in the case of any person in respect of whom search has been carried out under section 132A or documents or assets have been requisitioned under section 132A. Section 158BD, however, provides for taking recourse to a block assessment in terms of section 158BC in respect of any other person, the conditions precedent wherefor are : (i) satisfaction must be recorded by the Assessing Officer that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 of the Act; (ii) the books of account or other documents or assets seized or requisitioned had been handed over to the Assessing Officer having jurisdiction over such other person; and (iii) the Assessing Officer has proceeded under section 158BC against such other person.The conditions precedent for invoking the provisions of section 158BD, thus, are required to be satisfied before the provisions of the said Chapter are applied in relation to any person other than the person whose premises had been searched or whose documents and other assets had been requisitioned under section 132A of the Act. It was further held -" Law in this regard is clear and explicit. The only question which arises for our consideration is as to whether the notice dated February 6, 1996, satisfies the requirements of section 158BD of the Act. The said notice does not record any satisfaction on the part of the Assessing Officer. Documents and other assets recovered during search had not been handed over to the Assessing Officer having jurisdiction in the matter."It was also held that -" As the Assessing Officer has not recorded his satisfaction, which is mandatory; nor has he transferred the case to the Assessing Officer having jurisdiction over the matter, we are of the opinion that the impugned judgments of the High Court cannot be sustained, which are set aside accordingly. The appeals are allowed. However, in the facts and circumstances of the case, there shall be no order as to costs."9.2 Hon'ble Madras High Court in the case of CIT v. G.K. Senniappan; 284 ITR 220 held -" The assessee was engaged in the business of chit fund and real estate. In a search conducted against a third person it was found that the assessee had utilized undisclosed income for making contributions to certain unregistered chits conducted by the said person. Thereafter, a survey was conducted in the business premises of the assessee which indicated certain real estate transactions carried on by the assessee and profits derived thereon had not been disclosed to the Department. The Assessing Officer included under section 158BB the undisclosed income found during the survey made under section 133A. The Commissioner (Appeals) excluded that portion which had been included based on the material found during the survey on the premises that in respect of block assessment under section 158BB material collected during the survey under section 133A could not be taken into consideration. This was confirmed by the Tribunal. On appeal contending that the material gathered in the course of survey under section 133A could also be regarded as a material for the purpose of block assessment under section 158BB:Held accordingly, dismissing the appeal, that the Commissioner (Appeals) and the Tribunal having decided the issue in accordance with the statutory provisions, it required no interference."9.3. Sec. 153A of the IT Act starts with the word "notwithstanding anything contained", it is non-obstante clause. For applicability of above provision, the initiation of search is necessary. Once a warrant of authorization or requisition is issued and search is conducted and panchnama is drawn, the assessments for the all the relevant years would get reopened irrespective of whether any incriminating material is found or not in relation to a particular AY. In other words, even if the material found shows the concealment in only one year, all the completed assessments falling in the period of six AYs preceding the year of search will get reopen. There was an identical provision contained in Chapter XIV-B of the Act, which provides that where after 30th June, 1995, a search is initiated u/s 132 or books accounts etc. are requisitioned u/s 132A, the AO shall proceed to assess undisclosed income in accordance with provisions of Chapter XIV-B for making assessment for block period but in the block assessments, the question of assessing an undisclosed income in relation to any AY was restricted to the incriminating material on undisclosed assets discovered during the course of search and seizure or in the post search inquiry the material was relatable to such evidence discovered in search. The income assessed in the regular assessments was not to be considered in the block assessments. However, in the present provisions u/s 153A, there is no such provision provided in the Act. Once warrant of authorization is issued and the search is conducted and panchnama is drawn, the assessments for all the seven years including the current year have to be completed u/s 153A, 153B and 153C. Even the assessments which are completed before the date of search shall get reopened and those assessments where the proceedings are pending at the time of search shall abate. The AO, therefore, shall assess or reassess such income for all these years.9.4 Sec. 153C of the IT Act however provides for taking recourse to a assessment of income of any other person other than the person searched and the conditions precedent for invoking such provisions against such other person are:1. The search or requisition must have taken place in case of any person.2. Where the AO is satisfied that any money, bullion, jwellery or other valuable articles or other things or books of accounts or documents seized or requisitions belongs or belong to a person other than the person referred to in sec. 153A.3. The books accounts or documents or assets seized or requisitioned shall be handed over to the AO having jurisdiction over such other person.4. The AO has proceeded u/s 153C against such other person.9.5 As is noted above, there are certain distinguished features in earlier provisions of law in Chapter XIV-B contained u/s sec. 158BA, 158BB and 158BC as compared to sec. 153A but the provisions contained u/s 158BD are more or less similar to provisions contained in sec. 153C of the IT Act except "undisclosed income" which is mentioned in sec. 158BD, however, in sec. 153C, it is mentioned any money, bullion, jwellery or other valuable articles or things or books accounts or documents seized or requisitions. The conditions precedent for invoking provisions u/s 158BD as is held by Hon'ble Supreme Court in the case of Manish Maheshwari (supra) are therefore same as are provided u/s 153C of the IT Act. It is admitted fact that no search warrant was executed in the case of the present assessee u/s 132(1) of the IT Act, therefore, provisions of sec. 153A were not applicable. The AO has, therefore, proceeded against the assessee u/s 153C of the IT Act. This view is further strengthened by the judgment of Hon'ble Gujrat High Court in the case of Vijaybhai N. Chandrani vs. ACIT, 333 ITR 436 = (2010-TIOL-371-HC-AHM-IT) in which it was held as under :"Section 153A, 153B and 153C of the Income-tax Act, 1961, lay down a scheme for assessment in case of search and requisition. Section 153C which is similarly worded to section 158BD of the Act, provides 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 he shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person. However, there is a distinction between the two provisions inasmuch as under section 153C notice can be issued only where the money, bullion, jewellery or other valuation article or thing or books of account or documents seized or requisitioned belong to such other person, whereas under section 158BD if the Assessing Officer was satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or assets were requisitioned under section 132A, he could proceed against such other person under section 158BC. Thus a condition precedent for issuing notice under section 153C and assessing or reassessing income of such other person, is that the money, bullion, jewellery or other valuable articles or thing or books of account or documents seized or requisitioned should belong to such person. If the requirement is not satisfied, recourse cannot be had to the provisions of section 153C.Held, allowing the petition, that admittedly, the three loose papers recovered during the search proceedings did not belong to the petitioner. It was not the case of the Revenue that the three documents were in the handwriting of the petitioner. In the circumstances, when the condition precedent for issuance of notice was not fulfilled action taken under section 153C of the Act stood vitiated."9.6 Considering the facts recorded above in the light of the above provisions and decisions, we find that assessee had a case for quashing of proceedings u/s 153C of the IT Act. No material is produced before us to prove that the AO in the case of person searched was satisfied that any money, bullion, jwellery or other valuable articles or things or books accounts or documents seized or requisitioned belongs to or belong to a person other than the person referred to in sec. 153A. No material is produced before us to show if any satisfaction was recorded by the AO in that case that the seized material belongs to any person other than the person with respect to whom search was made u/s 132 of the Act. Ld. DR did not produce any material before us to show if any such satisfaction as required u/s 153C was recorded by the AO in the case of person searched. No material is produced in reference to above requirement. No material is also produced before us to show that books accounts or documents or assets seized had been handed over to the AO having jurisdiction over such other person. In the absence of any adequate material produced by ld. DR, we find the contention of ld. counsel for assessee was justified that in this case, the AO has not recorded any satisfaction that any seized document or material belongs to any person other than the person searched. Since the revenue is in appeal, therefore, burden was upon them to prove that necessary ingredients of sec. 153C have been complied with in this case before invoking jurisdiction u/s 153C of the IT Act. We may also add here that the AO has not referred to any seized document or material in the assessment orders on the basis of which, additions on merit have been made. Therefore, the conditions of sec. 153C as noted above are also not satisfied in this case. We, therefore, do not find any infirmity in the order of the ld. CIT(A) in quashing the proceedings u/s 153C of the IT Act.9.7 Considering the above discussion, it is clear that the ld. CIT(A) on perusal of the record found that the AO has nowhere recorded any satisfaction as required u/s. 153C of the IT Act. Due to the same reason, the same was not communicated to the assessee. The issue is, therefore, squarely covered by the judgments noted above and therefore, the decision in the case of Digvijay Chemicals (supra) cannot be given preference. We, therefore, do not find any infirmity in the order of the ld. CIT(A) in quashing the assessment order u/s. 153C of the IT Act. In the result, ground No. 1 of departmental appeal fails and is dismissed. Since we have confirmed the quashing of proceedings u/s. 153C of the IT Act, therefore, all additions made in the assessment order would stand deleted. However, we find that similar issues are coming up in the subsequent assessment years, therefore, we find it appropriate to discuss the issues on merits briefly in this order in one of the appeals only."
6.1 Considering the facts of the case, it is clear that no search was conducted against the assessee u/s. 132 of the IT Act, therefore, proceedings u/s. 153C have been initiated. The AO did not make any addition against the assessee on the basis of any adverse material. The AO passed the assessment order u/s. 153C of the IT Act making addition of Rs.77,433/- on account of determination of Annual Letting Value u/s. 23(4) of the IT Act of the property at 7% of investments. The determination of Annual Letting Value is only on notional basis and for that, no incriminating material was found against the assessee. No material is produced before us to prove that the AO in the case of person searched was satisfied that any money, bullion, jewellery or other valuable articles or things or books of account or documents seized or requisition belongs to or belonging to a person other than the person referred to in section 153A. No material is produced before us to show if any satisfaction was recorded by the AO in that case that the seized material belongs to any person other than the person with respect to whom search was made u/s. 132 of the IT Act. The ld. DR was directed to file copy of the satisfaction note recorded by the AO for initiating the proceedings u/s. 153C of the IT Act. However, the ld. DR did not produce any satisfaction note u/s. 153C or any material before us to show if any such satisfaction as required u/s. 153C was recorded by the AO in the case of person searched. No material is produced in reference to the above requirement. No material is also produced before us to show that the books of account or documents or assets seized had been handed over to the AO having jurisdiction over such other person. In the absence of any material produced before us, we find the contention of the ld. counsel for the assessee was justified that in this case the AO has not recorded any satisfaction that any seized documents or material belongs to any person other than the person searched. Therefore, necessary ingredients of section 153C have not been complied with in this case before invoking the jurisdiction u/s. 153C of the IT Act. We may also add here that the AO has not referred to any seized documents or material in the assessment orders on the basis of which notional Annual Letting Value was determined. Therefore, conditions of section 153C as noted above are not satisfied in this case. Considering the above discussion in the light of our order in the case of M/s. Global Estates (supra), we do not find any justification to sustain the proceedings u/s. 153C initiated by the authorities below against the assessee. We, accordingly, set side the orders of the authorities below and quash the proceedings u/s. 153C of the IT Act. Therefore, all the additions made in the assessment orders u/s. 153C would stand deleted.
7. In the result, all the appeals of the assessee are allowed.
(Order pronounced in the open court.)
Regards,
Pawan Singla
BA (Hon's), LLB
Audit Officer
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