Pepsi Foods P. Ltd. v. Assistant Commissioner of Income-tax
[Citation -2014-LL-0807-62]

Citation 2014-LL-0807-62
Appellant Name Pepsi Foods P. Ltd.
Respondent Name Assistant Commissioner of Income-tax
Court HIGH COURT OF DELHI AT NEW DELHI
Relevant Act Income-tax
Date of Order 07/08/2014
Assessment Year 2006-07
Judgment View Judgment
Keyword Tags due date for furnishing the return • search and seizure operation • condition precedent • satisfaction note • valuable article • documents seized • issue of notice • raw material • real estate • ayurvedic
Bot Summary: The learned counsel for the petitioner submitted that section 153C permits the issuance of a notice by an Assessing Officer of a person who has not been searched, on the basis of a satisfaction note prepared by the Assessing Officer of a searched person indicating that during the search certain documents belonging to the other person were found. The learned counsel for the petitioner submitted that before a notice under section 153C can be issued in the manner indicated, the Assessing Officer of the searched person must arrive at a positive satisfaction that the documents belong to the person not searched. The learned counsel for the petitioner submitted that before the Assessing Officer of the searched person can be said to have arrived at the satisfaction that the documents belonged to the other person there has to be a rebuttal of that presumption on the basis of some material to which the Assessing Officer of the searched person should have applied his mind. Section 132(4A)(i) clearly stipulates that when, inter alia, any document is found in the possession or control of any person in the course of a search it may be presumed that such document belongs to such person. The same methodology cannot be imported into section 153C where, in our view, the Assessing Officer is required to arrive at a conclusive satisfaction that the document belongs to a person other than the searched person because such Assessing Officer has to rebut the normal presumptions which are suggested by the statute under sections 132(4A)(i) and 292C(1)(i) of the said Act. In fact the very distinction between section 153C and section 158BD is indicated by the following observations of the Division Bench in SSP Aviation Ltd.: It needs to be appreciated that the satisfaction that is required to be reached by the Assessing Officer having jurisdiction over the searched person is that the valuable article or books of account or documents seized during the search belong to a person other than the searched person. The satisfaction note itself must display the reasons or basis for the conclusion that the Assessing Officer of the searched person is satisfied that the seized documents belong to a person other than the searched person.


JUDGMENT judgment of court was delivered by Badar Durrez Ahmed J.-These six writ petitions pertain to very same issue and, therefore, same are being disposed of together. petitioner has challenged notices issued under section 153C of Income-tax Act, 1961 (hereinafter referred to as "the said Act"), all dated August 2, 2013, pertaining to assessment years 2006-07 to 2011-12. point urged by learned counsel appearing on behalf of petitioner is that basic ingredient of section 153C of said Act has not been satisfied and, therefore, notices are without jurisdiction and ought to be quashed. learned counsel for petitioner submitted that section 153C permits issuance of notice by Assessing Officer of person who has not been searched, on basis of satisfaction note prepared by Assessing Officer of searched person indicating that during search certain documents belonging to other person (the person not searched) were found. learned counsel for petitioner submitted that before notice under section 153C can be issued in manner indicated, Assessing Officer of searched person must arrive at positive satisfaction that documents belong to person not searched. He submitted that in first instance presumption is created by virtue of provisions of section 132(4A)(i) of said Act that documents belong to searched person. similar presumption is also indicated by provisions of section 292C of said Act. learned counsel for petitioner submitted that, therefore, before Assessing Officer of searched person can be said to have arrived at satisfaction that documents belonged to other person (the person not searched) there has to be rebuttal of that presumption on basis of some material to which Assessing Officer of searched person should have applied his mind. He further submitted that on going through satisfaction note of Assessing Officer of searched person, in present cases, it is not at all clear as to on what basis said Assessing Officer has arrived at so called satisfaction that seized documents belong to petitioner. It was, therefore, contended that notices under section 153C of said Act which are impugned herein are without any basis and ought to be quashed. learned counsel appearing on behalf of Revenue contended that documents which have been seized during search operations conducted on Jaipuria group on March 27, 2012, related to petitioner (Pepsi Foods Pvt. Ltd.). learned counsel also handed over copies of documents which have been tabulated in satisfaction note for our consideration. He submitted that since these documents pertained to transactions with petitioner, they can be construed as belonging to petitioner and, therefore, there is nothing wrong in Assessing Officer of Jaipuria group in recording satisfaction note and expressing his satisfaction that said documents belonged to petitioner. Consequently, he submitted that issuance of notices by Assessing Officer of petitioner (which incidentally is same officer as that of Jaipuria group) cannot be faulted and that writ petitions ought to be dismissed. learned counsel for Revenue placed reliance on decision of Gujarat High Court in Kamleshbhai Dharamshibhai Patel v. CIT [2013] 214 Taxman 558 (Guj). He also placed reliance on decision of Allahabad High Court in case of CIT v. Classic Enterprises [2013] 358 ITR 465 (All) and that of Division Bench of this court in SSP Aviation Ltd. v. Deputy CIT [2012] 346 ITR 177 (Delhi). Based on these decisions he contended that as long as documents bear some relation with petitioner, they can be said to belong to petitioner and, therefore, there was no illegality committed by concerned Assessing Officer in issuing satisfaction note as also impugned notices under section 153C. Referring to decision of Division Bench of this court in SSP Aviation Ltd. (supra), learned counsel for Revenue submitted that issuance of notice under section 153C is only first step to enquiry which is to follow. He submitted that once Assessing Officer of searched person arrives at satisfaction that document found during search operation related to person other than searched person, then it could be said that said document belonged to such other person and Assessing Officer was then bound to forward document to Assessing Officer having jurisdiction over other person (the person not searched), and, thereafter, it was for that Assessing Officer to follow procedure prescribed under section 153A in attempt to ensure that income reflected in seized documents had been accounted for by other person (the person not searched). We have considered submissions made by counsel for parties. Before proceeding any further it would be necessary to set out relevant provisions of said Act as applicable to assessment years under consideration: "153C.(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where 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 person other than person referred to in section 153A, then books of account or documents or assets seized or requisitioned shall be handed over to 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 provisions of section 153A: Provided that in case of such other person, reference to date of initiation of search under section 132 or making of requisition under section 132A in second proviso to sub-section (1) of section 153A shall be construed as reference to date of receiving books of account or documents or assets seized or requisitioned by 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 Assessing Officer having jurisdiction over such other person after due date for furnishing return of income for assessment year relevant to 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) 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 notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before date of receiving books of account or documents or assets seized or requisitioned by Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue notice and assess or reassess total income of such other person of such assessment year in manner provided in section 153A." "132. (4A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in possession or control of any person in course of search, it may be presumed- (i) That such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;" "292C. (1) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in possession or control of any person in course of search under section 132 or survey under section 133A, it may, in any proceeding under this Act, be presumed- (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;" On plain reading of section 153C, it is evident that Assessing Officer of searched person must be "satisfied" that, inter alia, any document seized or requisitioned "belongs to" person other than searched person. It is only then that Assessing Officer of searched person can handover such document to Assessing Officer having jurisdiction over such other person (other than searched person). Further more, it is only after such handing over that Assessing Officer of such other person can issue notice to that person and assess or reassess his income in accordance with provisions of section 153A. Therefore, before notice under section 153C can be issued two steps have to be taken. first step is that Assessing Officer of person who is searched must arrive at clear satisfaction that document seized from him does not belong to him but to some other person. second step is- after such satisfaction is arrived at- that document is handed over to Assessing Officer of person to whom said document "belongs". In present cases, it has been urged on behalf of petitioner that first step itself has not been fulfilled. For this purpose it would be necessary to examine provisions of presumptions as indicated above. Section 132(4A)(i) clearly stipulates that when, inter alia, any document is found in possession or control of any person in course of search it may be presumed that such document belongs to such person. It is similarly provided in section 292C(1)(i). In other words, whenever document is found from person who is being searched normal presumption is that said document belongs to that person. It is for Assessing Officer to rebut that presumption and come to conclusion or "satisfaction" that document in fact belongs to somebody else. There must be some cogent material available with Assessing Officer before he/she arrives at satisfaction that seized document does not belong to searched person but to somebody else. Surmise and conjecture cannot take place of "satisfaction". This would be appropriate stage to consider decisions referred to by learned counsel for Revenue. decision referred to in Kamleshbhai Dharamshibhai Patel (supra) is of no relevance in so far as present case is concerned. In that case certain documents were said to have belonged to petitioners therein but plea had been taken that as land, in relation to which documents were, no longer belonged to petitioners, therefore, said documents could not be regarded as belonging to petitioners. That is entirely different situation and facts of that case are clearly distinguishable from facts of present case. Insofar as decision of Allahabad High Court in Classic Enterprises (supra) is concerned, we are, with respect, unable to agree with observations that as proceedings are at very initial to agree with observations that as proceedings are at very initial stage "satisfaction" is neither required to be firm or conclusive. We say so because we are of view that this conclusion of Allahabad High Court is premised on consideration of provisions of section 158BD of said Act which are entirely different from section 153C. Under section 158BD, Assess ing Officer's satisfaction is with regard to "undisclose d income" belonging to person other than searched person. It is obvious that such satisfaction under section 158BD by its very nature has to be prima facie and tentative. same methodology cannot be imported into section 153C where, in our view, Assessing Officer is required to arrive at conclusive satisfaction that document belongs to person other than searched person because such Assessing Officer has to rebut normal presumptions which are suggested by statute under sections 132(4A)(i) and 292C(1)(i) of said Act. Therefore, decision of Allahabad High Court in case of Classic Enterprises (supra) would not come to aid of Revenue. In so far as decision in SSP Aviation Ltd. (supra) is concerned we do not find anything therein which militates against view that we are taking. In fact very distinction between section 153C and section 158BD (although section 158BD is not mentioned) is indicated by following observations of Division Bench in SSP Aviation Ltd. (supra) (page 188 of 346 ITR): "It needs to be appreciated that satisfaction that is required to be reached by Assessing Officer having jurisdiction over searched person is that valuable article or books of account or documents seized during search belong to person other than searched person. There is no requirement in section 153C(1) that Assessing Officer should also be satisfied that such valuable articles or books of account or documents belonging to other person must be shown to show to conclusively reflect or disclose any undisclosed income." It is only in this context that Division Bench was of view that issuance of section 153C notice was only first step in process of enquiry. only thing that remains to be examined now is satisfaction note itself. satisfaction note dated August 2, 2013, is in respect of assessment years 2006-07 to 2011-12 and same reads as under: "M/s. Pepsi Foods Pvt. Ltd. AY 2006-07 to 2011-12 2-8-2013 Satisfaction note for issue of notice under section 153C of Income-tax Act, 1961, in case of M/s Pepsi Foods Pvt. Ltd., for assessment years 2006-07 to 2011-12. Satisfaction note search and seizure operation under section 132(1) of Income-tax Act was carried out at various premises of M/s, Jaipu ria group on March 27, 2012. gro up is also into various other businesses, viz., Raymond Retail Franchisee, real estate and construction, fast foods, mining, education, ayurvedic products, information technology and medical services. One of major allegations against Jaipuria group is that assessee group in order to reduce its taxable profit indulged in enhancing cost of raw material purchased. On examination of accounts of various concerns, it is noticed that raw material are procured from fixed vendors. Since bulk purchases are made, rates should have been lower. However, raw material are being procured on high rates resulting in lower taxable income. bottler shall buy all units of concentrate required for manufacture of beverage from PFL (Pepsi Foods Ltd.) or manufacturer approved in writing by PFL (Pepsi Foods Ltd.) at price and in accordance with terms and conditions established by seller. Being sole supplier of concentrate to Jaipuria group, Pepsi Foods Pvt. Ltd. is closely associated to Jaipuria Gr. During post-search investigation, summons were issued to M/s Pepsi Foods Pvt. Ltd. to furnish certain details. complete details were not furnished. following documents were also found and seized during course of search and seizure action under section 132(1) of Income-tax Act, 1961 belonging to (PFL) M/s. Pepsi Foods Pvt. Ltd. (PAN: AAACP1557E) over which jurisdiction lies with undersigned: rty/Ann./Page Description of annexure No. This page contains summary of PFL claims as on C-4/A-2/77 November 29, 2011 (claims up to October 31, 2011) These pages contain detail of D VAT impact C-4/A-4/18-20. (April 10- June 10) Vs PFL support report and MRP plan. These pages contain details of discount per C/S C-4/A-4/21-23 PDL VS PFL. These pages contain details of status of PFL C-4/A-4/27 claims. This page contains details of concentrate stock C-4/A-5/54 summary as on 31-12-2010. This page contains summary of PFL claims as C-4/A-5/99 on 8/9/2011. Claims up to 31-8-2011. This page contains detail of PFL support year C-4/A-5/100 2011 Accordingly, section 153C of Income-tax Act, 1961, is applicable to M/s. Pepsi Foods Pvt. Ltd. which state that "where Assess ing Officer is satisfied that any money , bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong or belongs to person other than person referred to in section 153A, then books of account or documents or assets, seized or requisitioned shall be handed over to Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against such other person and issue such other person notice and assess or reassess income of such other person in accordance with provisions of section 153A." In view of facts narrated above, I am satisfied that case of M/s. Pepsi Foods Pvt. Ltd. is fit case for issue of notice under section 153C of Income-tax Act, 1961. Notice under section 153C dated August 2, 2013, is issued requiring assessee to file return of income for assessment years 2006-07 to 2011-12. (Pukini Lokho) Assistant Commissioner of Income-tax, Central Circle-12, New Delhi." It is evident from above satisfaction note that apart from saying that documents belonged to petitioner and that Assessing Officer is satisfied that it is fit case for issuance of notice under section 153C, there is nothing which would indicate as to how presumptions which are to be normally raised, as indicated above, have been rebutted by Assessing Officer. Mere use or mention of word "satisfaction" or words "I am satisfied" in order or note would not meet requirement of concept of satisfaction as used in section 153C of said Act. satisfaction note itself must display reasons or basis for conclusion that Assessing Officer of searched person is satisfied that seized documents belong to person other than searched person. We are afraid, that going through contents of satisfaction note, we are unable to discern any "satisfaction" of kind required under section 153C of said Act. This being position very first step prior to issuance of notice under section 153C of said Act has not been fulfilled. Inasmuch as this condition precedent has not been met, notices under section 153C are liable to be quashed. It is ordered accordingly. writ petitions are allowed as above. There shall be no order as to costs. *** Pepsi Foods P. Ltd. v. Assistant Commissioner of Income-tax
Report Error