IN HIGH COURT OF DELHI AT NEW DELHI W.P. (C) 2768/2016 & CM APPL. 11636/2016 W.P. (C) 2769/2016 & CM APPL. 11637/2016 ARN INFRASTRUCTURE INDIA LTD. ... Petitioner Through: Mr Sanjeev Sabharwal, Senior Advocate with Mr. Anshumaan Sahni, Advocates. Versus ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-28, NEW DELHI ... Respondent Through: Mr Rahul Chaudhary, Senior Standing Counsel and Ms Lakshmi Gurung, Junior Standing Counsel CORAM: JUSTICE S.MURALIDHAR JUSTICE CHANDER SHEKHAR ORDER 25.04.2017 Dr. S. Muralidhar, J.: 1. ARN Infrastructures India Ltd. has filed these two writ petitions against Income Tax Department ( Department ) assailing assumption of jurisdiction under Section 153C of Income Tax Act, 1961 ( Act ) by Respondent, Assistant Commissioner of Income-Tax, Central Circle-28, by issuing impugned notice dated 23rd July, 2014 and proceeding thereafter to pass order dated 18th March, 2016 proposing to frame assessment for Assessment Years ( AYs ) 2007-08 to 2012-13. 2. background facts are that on 16th January, 2013, search under Section 132 of Act was initiated and conducted in case of Earth W.P. (C) 2768/2016 &W.P. (C) 2769/2016 Page 1 of 10 Infrastructures Ltd ( EIL ) wherein certain documents were seized. When panchnama for search was prepared on 18th January 2013, name of Real Gain Estate Pvt. Ltd. ( RGEPL ) was also added to it. It is stated that during course of search, letter dated 27 th January, 2010 written by Petitioner to RGEPL was found. It contained details of commission payments made by Petitioner to RGEPL in that year with request to RGEPL to issue bills to Petitioner. three-page copy of ledger account of RGEPL maintained by Petitioner as proof of payments made through official channel was also seized. 3. aforesaid seized documents were handed over to Assessing Officer ( AO ) of EIL. However, only one document, viz., letter dated 27th January, 2010 written by Petitioner to RGEPL was handed over to AO of Petitioner. 4. impugned notice dated 23rd July, 2014 under Section 153 C of Act was issued to Petitioner by Respondent directing it to file its return of income for AY 2007-2008 to AY 2012-2013. Along with said notice, Satisfaction Note dated 21st July, 2014 was also enclosed. said Satisfaction Note reads thus: Satisfaction note for initiating proceedings under Section 153C read with 153A of Income Tax Act, 19611n case of M/s ARN Infrastructures India Limited, 9, Birla House, Arya Samaj Road, Karol Bagh, Karol Bagh, Delhi- 110005 (PAN AAFCA6403M) search action u/s 132 of I T Act,. 1,961 was initiated in case of M/s Earth Infrastructures Ltd, at B-100, Indl Area Naraina, Phase-I, New Delhi on 16/01/2013. It has been brought to notice by AO of M/s Earth Infrastructures Ltd,(in this case AO is same as undersigned) in whose cases-action under section 132 of Income Tax Act was taken place that various documents/books of accounts etc were found, and W.P. (C) 2768/2016 &W.P. (C) 2769/2016 Page 2 of 10 seized during course of search and statement of various persons were recorded; AO of searched persons has recorded his satisfaction that following seized papers / documents belonged to assessee i.e. M/s ARN Infrastructure India Limited. Party Name and, address of Details of Details of No person searched Annexure papers/documents seized 1. M/s Earth Infrastructures Annexure Pages 120-122 are Ltd, at B-100, Indl Area, A/27 of extract from books Naraina, Phase -1 New Delhi panchnama (Ledger) of M/s ARN dated Infrastructures India. 18.01.2013 Limited relating to M/s Real Gains Estate Pvt Ltd. Page no. 123 is fetter ; written by ARN Infrastructures India Limited dated 27/1/2010. said satisfaction note prepared by AO of person searched has been kept on record. I have also examined above documents and contents noted/written therein. After examination of these documents, I am also satisfied, that these documents belong to M/s ARN Infrastructures India Limited. .In view of same, I am; further satisfied that it is fit case for initiating proceedings u/s 153C rws-153A of Income Tax Act, 1961 for AYs 2007-08 to A.Y 2012-13. Accordingly, notices u/s 153A rws 153C are issued as per provisions of IT Act, 1961. New Delhi Asst. Commissioner of Income Tax 21/7/2014 Central Circle-14, New Delhi." 5. AO then issued Questionnaire under Section 142 (1) of Act requiring Petitioner to answer certain queries of certain other documents recovered during search. At that stage, Petitioner filed writ petition, W.P. (C) 2768/2016 &W.P. (C) 2769/2016 Page 3 of 10 W.P.(C) No. 2996 of 2015, in this Court assailing assumption of jurisdiction and issuance of notice to Petitioner under Section 153 C of Act. On 12th January, 2016, Petitioner sought leave to withdraw petition with liberty to urge all points raised therein before AO in accordance with law. petition stood dismissed as withdrawn and interim order was vacated. 6. On 11th March, 2016, Petitioner furnished to AO answers to questionnaire. On 17th March, 2016, Petitioner replied to notice under Section 153 C of Act. Inter alia it was pointed out that there was no satisfaction note prepared by AO in case of searched person i.e., EIL. Further, seized documents belonged to RGEPL and not Petitioner. Petitioner pointed out that taking date of initiation of proceedings under Section 153C to be 21st July, 2014 in terms of satisfaction note , relevant AYs would be AYs 2009-10 to 2014-15 and not AYs 2007-08 to 2012-13. It was therefore submitted that initiation of Section 153 C proceedings in respect of AYs 2007-08 and 2008-09 was without authority of law. Reliance was placed on decision of this Court in CIT-7 v. RRJ Securities Ltd. (2016) 380 ITR 612 (Del). Further, apart from fact that papers seized did not belong to Petitioner, they were relevant only for AY 2010-11. It was contended that seized papers could at best constitute relevant material only for year of search and not for earlier years. It was further pointed out that as regards AYs 2007-08 to 2012-13, there was no pending assessment, and in absence of any incriminating material, question of re-opening those assessments that already stood completed, did not arise. Reliance was placed on W.P. (C) 2768/2016 &W.P. (C) 2769/2016 Page 4 of 10 decision of this Court in CIT (Central)-III v Kabul Chawla (2016) 380 ITR 573 (Del). It was pointed out that for AY 2010-11, payment of commission as per ledger account in sum of Rs. 4.95 crores was part of its books of accounts that already stood disclosed during regular assessment. It could not be said to be incriminating material that pointed to concealment of income during AY 2010-11. 7. ACIT by letter dated 18th March, 2016 responded to above reply of Petitioner. It was inter alia stated that decision of CIT-7 v. RRJ Securities Ltd (supra) was not acceptable since Revenue had filed Special Leave Petition (SLP) against said judgment in Supreme Court and issue had not yet attained finality. Therefore, subject to decision of Supreme Court in said case, assessment for AYs 2007-08 and 2012-13 were proposed to be completed. It was further stated therein that documents seized did not belong to RGEPL. It appeared that what was stated in Satisfaction Note had been misunderstood by Petitioner. It was stated that numerous documents that belonged to Petitioner were seized and only because few of those documents had been referred to in Satisfaction Note and that too for purposes of making satisfaction note precise one would not exonerate Petitioner from proceedings under section 153 C of Act. Petitioner was asked to file its reply in respect of each of additions proposed in SCN for relevant AYs on or before 23rd March 2016, failing which, assessments which were getting barred by limitation on 31st March, 2016 would be finalized as such. W.P. (C) 2768/2016 &W.P. (C) 2769/2016 Page 5 of 10 8. It is at that stage that second writ petition being WP (C) No. 2769 of 2016 was filed by Petitioner in this Court. In that petition, notice was issued on 29th March, 2016 and interim order was passed that Assessment order pursuant to impugned notice dated 23 rd July, 2014 shall not be given effect to till next date of hearing. That interim order has continued since. 9. Court has heard submissions of Mr Sanjeev Sabharwal, learned Senior Counsel appearing for Petitioner and Mr Rahul Chaudhary, learned Senior Standing Counsel appearing for Revenue. 10. Mr Sabharwal relied upon decisions in CIT (Central)-III v Kabul Chawla (supra) CIT-7 v. RRJ Securities Ltd. (supra) and Principal Commissioner of Income Tax-06 v. Nikki Drugs and Chemicals Private Ltd. (2016) 386 ITR 680 (Del) to urge one condition for applicability of Section 153 C of Act, viz., that material seized had to belong to person other than searched person was not fulfilled in present case. Reliance was also placed on decision of this Court in Pepsico India Holding Pvt. Ltd. vs. ACIT (2015) 370 ITR 295 (Del). He reiterated contentions of Petitioner as raised in its letter dated 17th March, 2016 to AO. 11. In reply, Mr Rahul Chaudhary, learned Senior Standing Counsel appearing for Revenue, submitted that both letter dated 27th January 2010 written by Petitioner on its letter-head to RGEPL as well as three page ledger account in fact belonged to or pertained to Petitioner. Therefore, initiation of proceedings under Section 153C of Act was not W.P. (C) 2768/2016 &W.P. (C) 2769/2016 Page 6 of 10 bad in law. He reiterated stand of Revenue that since SLP against decision of this Court in CIT-7 v. RRJ Securities Ltd., (supra) was pending in Supreme Court, it could not be said that ratio of that decision was settled legal position. 12. decision in CIT-7 v. RRJ Securities Ltd. (supra) is categorical that under Section 153 C of Act, period of six years as regards person other than searched person would commence only from year in which satisfaction not is prepared by AO of searched person and notice is issued pursuant thereto. date of Satisfaction Note is 21st July, 2014 and notice under Section 153 C of Act was issued on 23rd July 2014. previous six AYs would therefore be from AY 2009-10 to AY 2014-15. This would therefore not include AYs 2007-08 and 2008-09. decision in CIT-7 v. RRJ Securities Ltd. (supra) is also authority for proposition that for proceedings under Section 153C to be valid, there had to be satisfaction note recorded by AO of searched person. 13. As regards seized documents, what is mentioned in Satisfaction Note are two documents: ledger account maintained by Petitioner running into 3 pages showing commission payments made by Petitioner to RGEPL and letter dated 27th January, 2010 written by Petitioner to RGEPL. As far as latter document is concerned, it is letter written by Petitioner to RGEPL and, therefore, should be treated as document belonging to RGEPL and not to Petitioner. Whether it may or may not be related to Petitioner is not relevant since amendment to W.P. (C) 2768/2016 &W.P. (C) 2769/2016 Page 7 of 10 Section 153 C of Act in that regard was prospective with effect from 1st June 2015 i.e. subsequent to date of preparation of Satisfaction Note in present case. 14. decision in Pepsico India Holding Pvt. Ltd. v. ACIT (supra) which interpreted Section 153 C of Act, as it stood prior to its amendment, explained that expression belongs to should not be confused with expression relates to . One of instances cited in said decision was registered sale deed, copies of which could be available both with vendor and vendee. copy available with vendee could not be said to 'belong' to vendor and vice versa. 15. In Principal Commissioner of Income Tax-06 v. Nikki Drugs and Chemicals Ltd. (supra), searched person was SVP Builders India Ltd. photocopy of documents, original of which were with Assessee in that case, were recovered from SVP Builders during search. In circumstances, it was observed by Court as under: 21. ..... In present case, although photocopies of documents handed over to SVP Builders India Ltd. may be copies of original documents that belong to assessee, said photocopies would belong to SVP Builders India Ltd. as same were handed over to it in connection with investment made by Assessee. Similarly, certified copy of Assessee's resolution signed by its Directors, would also belong to SVP Builders India Ltd. even though minutes of Board meeting form part of record of Assessee. We find no infirmity with view taken by ITAT in this regard. Thus, notwithstanding controversy whether assessing officer of searched persons had recorded his satisfaction that specified seized documents belonged to Assessee, initiation of proceedings under section 153C of W.P. (C) 2768/2016 &W.P. (C) 2769/2016 Page 8 of 10 Act, in respect of Assessee would be without jurisdiction. 16. Therefore, it cannot be said that letter dated 27th January, 2010 written by Petitioner to RGEPL and recovered from premises of RGEPL was document which belonged to Petitioner. 17. As regards other document seized, and mentioned in Satisfaction Note viz., extract of ledger account maintained by Petitioner concerning payments of commission made by it to RGEPL, even if it is held to 'belong' to Petitioner, it could hardly be said to be 'incriminating' document. This was document relevant only for AY 2010-11. It could not have been used for re-opening assessments of earlier years i.e. AYs 2007-08 to AY 2009-10, 2011-12 and 2012-13. This position again stands settled by decision in CIT-7 v. RRJ Securities Ltd (supra). fact that Revenue's SLP against said decision is pending in Supreme Court does not make difference sine operation of said decision has not been stayed. 18. While ledger account extract may be relevant for AY 2010-11, it cannot be said to be incriminating material warranting re-opening of assessment. return originally filed by Petitioner for said AY 2010-11 was picked up for scrutiny and finalised by assessment order under Section 143 (3) of Act. payments of commission to RGEPL to tune of Rs. 4.95 crores as reflected in ledger account was already disclosed in Petitioner's accounts which were examined while finalising regular assessment. Therefore, ledger account could not have led W.P. (C) 2768/2016 &W.P. (C) 2769/2016 Page 9 of 10 AO to be satisfied that any income had escaped assessment for AY 2010-11. 19. net result is that neither of documents mentioned in Satisfaction Note could have formed valid basis for AO to initiate proceedings against Petitioner under Section 153 C of Act for AY 2010-11 or any of other years as proposed. 20. For all of aforementioned reasons, Court quashes impugned notice dated 23rd July, 2014 issued by AO to Petitioner under Section 153A read with Section 153C of Act and all proceedings consequent thereto including order dated 16th March 2016 of AO. 21. writ petitions are allowed in above terms but, in circumstances, with no orders as to costs. pending applications are also disposed of. S.MURALIDHAR, J CHANDER SHEKHAR, J APRIL 25, 2017 rd W.P. (C) 2768/2016 &W.P. (C) 2769/2016 Page 10 of 10 Arn Infrastructure India Ltd. v. Assistant Commissioner of Income-tax, Central Circle-28, New Delhi