Commissioner of Income Tax-7 v. M/s Refam Management Services (P) Ltd
[Citation -2015-LL-1105-2]

Citation 2015-LL-1105-2
Appellant Name Commissioner of Income Tax-7
Respondent Name M/s Refam Management Services (P) Ltd.
Court HIGH COURT OF DELHI AT NEW DELHI
Relevant Act Income-tax
Date of Order 05/11/2015
Judgment View Judgment
Keyword Tags documents seized • satisfaction note • search and seizure • search proceedings
Bot Summary: The aforesaid appeals before the Tribunal, were filed by the Revenue impugning a common order of the Commissioner Income Tax dated 5th December, 2011 partly allowing appeals of the Assessee in respect of the assessment orders passed by the Assessing Officer under Section 153C read with Section 143(2) of the Act. The Assessee had challenged the CIT(A) s order to the limited extent that the CIT(A) had not accepted the Assessee s contention that the assessment orders passed were illegal and without jurisdiction. At the outset, Mr Kumar, learned counsel for the Assessee submitted that the AO had no jurisdiction to make an assessment under Section 153C of the Act as no relevant material belonging to the Assessee had been found during the search conducted under Section 132 of the Act on B.K. Dhingra, Poonam Dhingra and Madhusudan Buildcon Pvt. Ltd. He submitted that in absence of any incriminating material, proceedings under Section 153C of ITA 171/2015 Connected Matters Page 3 of 9 the Act could not be initiated. The AO of the Assessee recorded a Satisfaction Note on 5th July, 2010 to the effect that the documents seized belonged to the Assessee and Section 153C was invokeable. 6.2 The Assessee, in compliance with the notice issued under Section 153C of the Act, filed its returns of income under protest. In view of the aforesaid, the AO concluded that the Assessee was unable to substantiate any purchase of stocks and made addition of the amounts reflected as purchases under Section 69C of the Act. 6.7 The CIT(A) allowed the appeal of the Assessee with regard to the disallowance of purchases under Section 69C of the Act and observed that Section 69C of the Act applies only when there is some expenditure and the Assessee is unable to explain the source from which such expenditure has been incurred.


HIGH COURT OF DELHI AT NEW DELHI % Judgment delivered on: 05.11.2015 + ITA 171/2015 COMMISSIONER OF INCOME TAX-7 ..... Appellant versus M/S REFAM MANAGEMENT SERVICES (P) LTD. ..... Respondent AND + ITA 172/2015 COMMISSIONER OF INCOME TAX-7 ..... Appellant versus M/S REFAM MANAGEMENT SERVICES (P) LTD. ..... Respondent AND + ITA 173/2015 COMMISSIONER OF INCOME TAX-7 ..... Appellant versus M/S REFAM MANAGEMENT SERVICES (P) LTD. ..... Respondent AND + ITA 174/2015 COMMISSIONER OF INCOME TAX-7 ..... Appellant versus M/S REFAM MANAGEMENT SERVICES (P) LTD. ..... Respondent Advocates who appeared in these cases: For Appellant : Mr N.P. Sahni, Senior Standing Counsel with MR Nitin Gulati, Junior Standing Counsel. For Respondent : Mr. Arvind Kumar and Mr. Vikas Jain. ITA 171/2015 & Connected Matters Page 1 of 9 CORAM: DR. JUSTICE S. MURALIDHAR MR. JUSTICE VIBHU BAKHRU JUDGMENT VIBHU BAKHRU, J 1. Revenue has preferred these appeals under Section 260A of Income Tax Act, 1961 (hereafter Act ) impugning common order dated 26th August, 2014 passed by Income Tax Appellate Tribunal (hereafter Tribunal ) in batch of six appeals and six cross objections relating to six assessment years (AYs), being AYs 2003-04 to 2008-09. aforesaid appeals before Tribunal, were filed by Revenue (being ITA Nos. 1081-1086/Del/2012) impugning common order of Commissioner Income Tax (Appeals) dated 5th December, 2011 partly allowing appeals of Assessee in respect of assessment orders (all dated 31st December, 2010) passed by Assessing Officer (hereafter AO ) under Section 153C read with Section 143(2) of Act. Revenue was aggrieved inasmuch as CIT(A) had set aside addition to total income of Assessee made by AO under Section 69C of Act in respect of purchases as declared by Assessee as well as set aside AO s decision to disallow entire expenses claimed by Assessee. Tribunal s order dated 26th August, 2014 also disposed of ITA 171/2015 & Connected Matters Page 2 of 9 cross objections preferred by Assessee 6 in number as being academic. Assessee had challenged CIT(A) s order to limited extent that CIT(A) had not accepted Assessee s contention that assessment orders passed were illegal and without jurisdiction. 2. This Court, by order dated 9th March, 2015, admitted present appeals and issued notice to respondents. On said date, following questions were framed:- 1. Did ITAT fall into error in holding that Section 69C was inapplicable in facts and circumstances of present cases given that Revenue s contention was that material in form of statement recorded during search proceedings indicated that no genuine sale and purchase transaction was entered into by assessee; and 2. Whether in circumstances, AO was justified in bringing to tax amounts disallowed in course of search assessment under Section 153C. 3. At outset, Mr Kumar, learned counsel for Assessee submitted that AO had no jurisdiction to make assessment under Section 153C of Act as no relevant material belonging to Assessee had been found during search conducted under Section 132 of Act on B.K. Dhingra, Poonam Dhingra and Madhusudan Buildcon Pvt. Ltd. He submitted that in absence of any incriminating material, proceedings under Section 153C of ITA 171/2015 & Connected Matters Page 3 of 9 Act could not be initiated. In addition, he submitted that proceedings in respect of AY 2003-04 and AY 2004-05 were beyond period of six years from end of financial year preceding year in which satisfaction under Section 153C of Act was recorded and, thus, outside scope of Section 153C of Act. He submitted that present case also involved question as to jurisdiction of AO to make assessments under Section 153C of Act; but, as questions of law were framed prior to issuance of notice in these appeals, Assessee had no opportunity to suggest same. 4. Mr N.P. Sahni, learned Senior Standing Counsel for Revenue, did not dispute that substantial question of law as suggested by Mr. Kumar also arose in these matters. Accordingly, parties were also heard on following question of law which arises from impugned order passed by Tribunal:- Whether AO had jurisdiction to assess and reassess income of Assessee under Section 153C in respect of AYs 2003-04 to 2008-09? 5. These appeals were taken up alongwith batch of appeals captioned Commissioner of Income Tax-7 v. RRJ Securities Ltd.: ITA 164/2015 and other connected matters, decided on 30.10.2015. ITA 171/2015 & Connected Matters Page 4 of 9 6. Briefly stated, relevant facts necessary to address issues involved in above captioned matters are as under:- 6.1 Search and seizure operations were undertaken under Section 132 of Act in case of Sh. B.K. Dhingra, Smt. Poonam Dhingra and M/s Madhusudan Buildcon Pvt. Ltd. (hereafter also referred to as searched persons ) on 20th October, 2008. Certain documents belonging to Assessee Company were seized during search. AO of Assessee recorded Satisfaction Note on 5th July, 2010 to effect that documents seized belonged to Assessee and, hence, Section 153C was invokeable. On aforesaid basis, proceedings were initiated under Section 153C and notice dated 6th July, 2010 for AY 2003-04 was issued to Assessee. 6.2 Assessee, in compliance with notice issued under Section 153C of Act, filed its returns of income under protest. Subsequently, notices under Section 142(1)/143(2) of Act were also issued for purpose of assessing income of Assessee with respect to AY 2003- 04. ITA 171/2015 & Connected Matters Page 5 of 9 6.3 Assessee sent letter dated 29th November, 2010 to AO requesting AO to provide copies of seized material. Assessee also contested initiation of proceedings under Section 153C of Act in addition to contending that assessments were time barred. In reply to said letter, ACIT vide letter dated 3 rd December, 2010 observed that Assessee interpreted first proviso of Section 153C(1) wrongly. 6.4 AO subsequently passed assessment orders dated 31 st December, 2010, under Section 143(3)/153C of Act. During assessment proceedings, it was observed that Assessee had purchased and sold textile goods and fabrics and it was called upon to provide evidence of purchases and was further directed to provide details of payments (by cash or cheque). In its reply, Assessee claimed that all purchases were made in cash. Assessee claimed that it was dealing only in tax free goods and was not required to file sales tax returns. 6.5 AO observed that case of Assessee is connected with Thapar Group of cases in which it was declared that at least 15 concerns were operating from address "B-340, Hari Nagar, New Delhi". These concerns were alleged to be capital formation concerns with huge reserves and surpluses that were reflected as invested in stock of textiles. AO ITA 171/2015 & Connected Matters Page 6 of 9 also found that no operations were undertaken from aforementioned premises. In view of aforesaid, AO concluded that Assessee was unable to substantiate any purchase of stocks and, therefore, made addition of amounts reflected as purchases under Section 69C of Act. AO also disallowed 100% of expenses claimed by Assessee in its P & L Account concluding that they were unverifiable. 6.6 In response to request under Right to Information Act, 2005, ACIT vide letter dated 14th May, 2015 provided Assessee with photocopy of papers seized that contained Record Slips of cheque book pertaining to Bank Account with Centurion Bank of Punjab Limited, Tilak Nagar Branch, New Delhi. said record slips - which formed part of cheque book contained entries pertaining to cheques issued in 2008. 6.7 CIT(A), however, allowed appeal of Assessee with regard to disallowance of purchases under Section 69C of Act and observed that Section 69C of Act applies only when there is some expenditure and Assessee is unable to explain source from which such expenditure has been incurred. CIT(A) held that Assessee had accounted for all purchases made in cash in its books of accounts and, ITA 171/2015 & Connected Matters Page 7 of 9 thus, source of expenditure could not be stated to be unexplained. CIT(A) also deleted addition made by AO on account of 100% disallowance of expenditure. 6.8 Being aggrieved by common order dated 5th December, 2011 passed by CIT(A), Revenue filed six separate appeals in respect of relevant assessment years before Tribunal. Assessee, on other hand, filed cross objections which were numbered as separate appeals. Tribunal upheld view of CIT(A) that addition under Section 69C of Act was not sustainable and, accordingly, by order dated 26th August, 2014, rejected appeals preferred by Revenue. Tribunal also agreed with decision of CIT(A) regarding deletion of 100% disallowance of expenditure and depreciation claimed by Assessee. aforesaid order is impugned in present appeals. 7. It is apparent from above that only document seized during search in question was cheque book pertaining to Assessee which reflected issue of cheques during period August 2008 to October 2008, relevant to AY 2009-10. facts and questions of law that arise in these appeals are similar to facts and controversy involved in RRJ Securities Ltd. (supra). Thus, for reasons stated in RRJ Securities Ltd. ITA 171/2015 & Connected Matters Page 8 of 9 (supra), third question framed, whether proceedings under Section 153C of Act could be initiated against Assessee, is answered in favour of Assessee and against Revenue. 8. In view of above, it is not necessary for us to examine other questions. appeals are, accordingly, dismissed. In circumstances, parties are left to bear their own costs. VIBHU BAKHRU, J S. MURALIDHAR, J NOVEMBER 05, 2015 RK ITA 171/2015 & Connected Matters Page 9 of 9 Commissioner of Income Tax-7 v. M/s Refam Management Services (P) Ltd
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