Principal Commissioner of Income-tax 3 v. Himanshu Chandulal Patel
[Citation -2019-LL-0730-68]

Citation 2019-LL-0730-68
Appellant Name Principal Commissioner of Income-tax 3
Respondent Name Himanshu Chandulal Patel
Court HIGH COURT OF GUJARAT AT AHMEDABAD
Relevant Act Income-tax
Date of Order 30/07/2019
Assessment Year 2010-11
Judgment View Judgment
Keyword Tags search and seizure operation • undisclosed capital gain • satisfaction note • tangible material • cogent material • searched person • seized document • seized material • belongs to • ownership
Bot Summary: As per seized documents, it is clearly evident that the group run by Sh. Rahul Page 2 of 11 Downloaded on : Thu Oct 10 14:42:52 IST 2019 C/TAXAP/342/2019 ORDER Gautam, MD of M/s. Sheela Foam Private Limited, has paid huge amount of cash as indicated on the seized documents to Sh. Pradhuman Patel and his group for purchase of shares. Page 5 of 15 searched person arrives at the satisfaction that a document found during the search operation related to a person other the searched person, then it could be said that the said document belonged to such other person and the Assessing Officer was then bound to forward the document to the Assessing Officer having jurisdiction over the other person, and, thereafter, it was for that Assessing Officer to follow the procedure prescribed under Section 153A in an attempt to ensure that the income reflected in the seized documents had been accounted for by the other person. The assessee has accepted all the payments/ receipts through cheque mentioned in the seized documents at the same time has denied the cash component, though reflected in the seized document. On a plain reading of Section 153C, it is evident that the Assessing Officer of the searched person must be satisfied that inter alia any document seized or requisitioned belongs to a person other than the searched person. The first step is that the Assessing Officer of the person who is searched must arrive at a clear satisfaction that a document seized from him does not belong to him but to some other person. The second step is after such satisfaction is arrived at that the document is handed over to the Assessing Officer of the person to whom the said document belongs. 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.


C/TAXAP/342/2019 ORDER IN HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 342 of 2019 PRINCIPAL COMMISSIONER OF INCOME TAX 3 Versus HIMANSHU CHANDULAL PATEL Appearance: MRS MAUNA M BHATT(174) for Appellant(s) No. 1 for Opponent(s) No. 1 CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR.JUSTICE A.C. RAO Date : 30/07/2019 ORAL ORDER (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1. This tax appeal under Section 260A of Income Tax Act, 1961 [for short Act, 1961] is at instance of revenue and is directed against order passed by Income Tax Appellate Tribunal, dated 31/12/2018 in ITA No.1456/DEL/2015 for Assessment Year 2010 11. 2. revenue has proposed following substantial question of law for consideration of this Court: Whether Appellate Tribunal has erred in law and on facts in interpreting term 'belongs to' as 'ownership' in Section 153C of Act particularly when intention of legislature is always that section 153C is applicable when documents seized in searched premise belongs to or its content thereof pertains to some other person in view of amendment by Finance Act, 2015? 3. It appears from materials on record that search and seizure operation under Section 132 of Act was undertaken at business Page 1 of 11 Downloaded on : Thu Oct 10 14:42:52 IST 2019 C/TAXAP/342/2019 ORDER premises of M/s. Sheela Foam Private Limited on 28/11/2011. Few documents were recovered during search operation and those were seized. case of assessee was centralized vide order under Section 127 of Act dated 16/11/2012 passed by CIT, Ahmedabad. notice under Section 153C of Act was issued on 29/08/2013. return declaring income of Rs.13,86,47,670/ was filed by assessee on 06/01/2014. 4. notice under Section 143(2) was issued on 24/12/2013. details/information furnished by assessee during course of assessment proceedings, were examined by Assessing Officer. Assessing Officer recorded following satisfaction: During course of search operation u/s.132 of IT Act carried on 28/11/2011 at business premises of M/s. Sheela Foam Private Limited it was observed that shares held by Pradhuman Patel group (P P Group) and other Patel Group in M/s. Sheela Foam Private Limited were acquired by company M/s. Serta India Private Limited (Rahul Gautam Group) during Financial Year 2009 10. During search operation various incriminating evidences were found and seized from office premises of M/s. Sheela Foams Pvt. Ltd. which established beyond doubt that for acquiring such shares by Rahul Gautam Group from Pradhuman Patel Group and others Patel Group, substantial consideration was paid by Rahul Gautam Group to Pradhuman Patel Group and others in cash outside books of account. As per evidences found and seized, it was revealed that total sale consideration for shares as held by Pradhuman Group and other patel group in M/s. Sheela Foams Pvt. Ltd. was Rs.88.90 crores out of which Rs.52.78 crores was paid through cheques and balance amount of Rs.36.10 (Rs.31.85 crores to Pradhuman Patel Group & 4.25 crore to other patel group) crores was paid in cash by Rahul Gautam Group to Pradhuman Patel Group and other patel group. As per seized documents (Page no.41 to 85 of Annexure A1, Page no.20, 21 of Annexure 7, Page no.12 of Annexure 5, Page no.21 of Annexure 8), it is clearly evident that group run by Sh. Rahul Page 2 of 11 Downloaded on : Thu Oct 10 14:42:52 IST 2019 C/TAXAP/342/2019 ORDER Gautam, MD of M/s. Sheela Foam Private Limited, has paid huge amount of cash as indicated on seized documents to Sh. Pradhuman Patel and his group for purchase of shares. As per statement of Shri Rahul Gautam (MD of M/s. Sheela Foam Private Limited) vide ques. No.44, shares of M/s. Sheela Foam Private Limited were purchased by M/s. Serta India Private Limited from Patel Group. Page no.41 of Annexure 1 as seized from office premises is sheet exhibiting detailed working in respect of transfer of shares as held by Pradhuman Patel and his family members in M/s. Sheela Foams Pvt. Ltd to RG (Rahul Gautam) Group. This is one document and will be correlative with other seized documents from time to time establish its sanctity. 5. seized documents contained details of payments/receipts in respect of transactions in shares by way of cheques and cash. Assessing Officer observed that assessee had disclosed capital gain in respect of transaction through cheques and capital gain on transactions made by way of cash, was not disclosed by him in his return of income. In such circumstances, Assessing Officer made addition of Rs.9,50,65,917/ on account of undisclosed capital gain on transfer of shares. 6. assessee being aggrieved with addition preferred appeal before CIT, Ahmedabad. 7. CIT, Ahmedabad while allowing appeal preferred by assessee, held as under: (M/s. SHEELA FOAM PRIVATE LIMITED) During course of search and seizure operation conduced on 28.11.2011 at Premises No.37/2, Site IV, Sahibabad Industrial Area, Ghaziabad, U.P., of Sheela Foam Private Limited, documents marked as Annexure 1 to 13 were found and seized. It is seen that above seized material contains following documents belong to Sh. Praduman Patel: Page 3 of 11 Downloaded on : Thu Oct 10 14:42:52 IST 2019 C/TAXAP/342/2019 ORDER 1. Annexure 1, P 41, photocopies of paper relating to settlement statement for transfer of shares from Pradhuman Patel Group to Rahum Gautam Group. P 75 & 81 contains photocopies of paper relating to settlement statement for transfer of shares from Pradhuman Patel Group To Rahul Gautam Group. 2. Annexure 2, Page 15 to 19 contains receipt dated 20/12/2009 of Rs.52476363/ issued to Rahul Gautam by Praduman Patel for sale 1052400 shares of M/s. Sheela Foam Pvt. Ltd. Page 19 receipt dated 20/12/2009 of Rs.55156365/ issued to Rahul Gautam by Pradhuman Patel for sale 678680 shares of M/s. Sheela Foam Pvt. Ltd. Page 22 & 25 contains photocopies of cheque issued by M/s. Sheela Foam Private Limited, M/s. Serta India P. Ltd., Rahul Gautam to Pradhuman Patel. Page 27, receipt dated 21/10/2009 of Rs.41334060/ issued to Rahul Gautam by Pradhuman Patel for sale shares of M/s. Sheela Foam Pvt. Ltd. Page 29, receipt dated 20/12/2009 of Rs.35000/ issued to Rahul Gautam by Pradhuman Patel for sale shares of M/s. Polyflex Marketing P Ltd. Page 28, receipt dated 21/10/2009 of Rs.34000/ issued to Rahul Gautam by Pradhuman Patel for sale shares of M/s. Starlite India Pvt. Ltd., Page 36, contain confirmation regarding no claim against M/s. Sheela Foam Private Limited. Page 35 contain confirmation regarding current or contingent liabilities against legal & beneficiary ownership of sale of shares. Page 30 contain receipt dated 31/10/2009 for Rs.35000/ issue to Sh. Rahul Gautam against sale 350 equity shares. In view of above, I am satisfied that documents seized belongs to person other than person under section 132 of IT Act, 1961. Hence, proceedings u/s 153C of IT Act, 1961 is initiated in case of Sh. Pradhuman Patel. 8. It appears that CIT, Ahmedabad by relying on Delhi High Court decision in case of Pepsi Foods Private Limited took view that satisfaction recorded by Assessing Officer was not sufficient Page 4 of 11 Downloaded on : Thu Oct 10 14:42:52 IST 2019 C/TAXAP/342/2019 ORDER enough to proceed against assessee by issuing notice under Section 153C of Act. CIT, Ahmedabad relied on presumption under Section 292C(1)(i) of Act, which provides that document which is recovered from person who was searched, would be belonging to that person. CIT, Ahmedabad took view there must be cogent and tangible material available with Assessing Officer before he arrives at satisfaction that seized document did not belong to searched person, but to someone else and such satisfaction cannot be on basis of surmises and conjectures. 9. Revenue being dissatisfied with order passed by CIT, Ahmedabad preferred appeal before Appellate Tribunal. 10. appellate tribunal concurred with findings recorded by CIT, Ahmedabad and ultimately, dismissed appeal. While dismissing appeal, appellate tribunal observed as under: 23. above decision of Honourable Delhi High Court has also considered decision of Gujarat High Court and Honourable Delhi High Court relied upon by learned CIT DR. above decision has reiterated same position that unless document belongs to assessee is shown by learned AO in satisfaction note itselt with reason and basis. 24. Even Honourable Delhi High Court in case of Ganpati Fincap Private limited Vs. CIT [2017] 82 taxmann.com 408 (Delhi)/ [2017] 395 ITR 692 (Delhi)/ [2017] 298 CTR 174 (Delhi) in para number 41(ii) has held that Where proceedings are proposed to be initiated under Section 153C of Act against 'other person', it has to be preceded by satisfaction note by AO of searched person. He will record in this satisfaction note that seized document belongs to other person. Depending on nature and contents of document he may be required to give some reasons for such conclusion. Therefore, it is apparent that if satisfaction note, does not have any reasons for such conclusion, it is not in accordance with law. For invoking jurisdiction under section 153C of Income Tax Act. Such is case before us, where there is no reason recorded by learned assessing officer stating that why these Page 5 of 11 Downloaded on : Thu Oct 10 14:42:52 IST 2019 C/TAXAP/342/2019 ORDER documents belong to assessee and not to person from whom it is found. 25. However before parting we would also like to state that it cannot be rule in its absoluteness that one document cannot be held to be belonging to more than one person. striking example of same is joint bank account pass book of several persons together may be belonging to all those persons. 26. Therefore, respectfully following above judicial precedents of honourable Delhi High Court, we do not find any reason to interfere in order of learned CIT A, wherein it has been held relying upon decision of honourable Delhi High Court in case of Pepsi Foods Private Limited (Supra) that there is no satisfaction recorded by learned assessing officer that impounded documents belong to various assessee and therefore, jurisdiction assumed by learned assessing officer u/s.153C of Income Tax Act is invalid. 11. Revenue being dissatisfied with impugned order passed by appellate tribunal is here before this Court with present appeal. 12. Mrs. Bhatt, learned senior standing counsel appearing for Revenue submitted that issuance of notice under Section 153C is only first step to enquiry which is to follow. She submitted that once Assessing Officer of WP(C) 415/2014 & Ors. Page 5 of 15 searched person arrives at satisfaction that document found during search operation related to person other 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). Page 6 of 11 Downloaded on : Thu Oct 10 14:42:52 IST 2019 C/TAXAP/342/2019 ORDER 13. She further submitted that decision of Appellate Tribunal is erroneous. Assessing Officer has clearly established that seized documents belong to assessees. seized document contained details of shares held by Patel Group (where assessee is one of shareholder), rate of transfer of shares, payment received through cheque, payment received in cash, balance payable in cash and cheques, receipts of payments for transfer of shares by assessee and copy of cheques for payment received which clearly belonged to assessee. seized documents also bear signature of assessee. assessee has accepted all payments/ receipts through cheque mentioned in seized documents at same time has denied cash component, though reflected in seized document. 14. She further submitted that assessee had accepted part details mentioned in seized document and denied payments made through cash. Thus, considering above facts, it is clearly established that seized material found from search premises belong to assessee. 15. 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 WP(C) 415/2014 & Ors. Page 6 of 15 income of such other person in accordance with Page 7 of 11 Downloaded on : Thu Oct 10 14:42:52 IST 2019 C/TAXAP/342/2019 ORDER 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. (1) xxxx xxxx xxxx (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; xxx xxx xxx "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 Page 8 of 11 Downloaded on : Thu Oct 10 14:42:52 IST 2019 C/TAXAP/342/2019 ORDER 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; 16. 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). Furthermore, it is only after such handing over that Assessing Officer of such other person can issue notice to that person and assess or re assess 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 Page 9 of 11 Downloaded on : Thu Oct 10 14:42:52 IST 2019 C/TAXAP/342/2019 ORDER 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". [See: Pepsi Foods (P.) Ltd. Vs. Assistant Commissioner of Income Tax; [2014] 52 taxmann.com 220 (Delhi)]. 17. We may refer to decision of Delhi High Court in case of Principal Commissioner of Income Tax (Central) 2 Vs. Index Securities (P.) Ltd. reported in [2017] 86 taxmann.com 84 (Delhi), wherein, Court observed as under: 28.4 Supreme Court also agreed with decision of Gujarat High Court in Kamleshbhai Dharamshibhai Patel (supra) to extent it held that it is essential condition precedent that any money, bullion or jewellery or other valuable articles or thing or books of accounts or documents seized or requisitioned should belong to person other than person referred to in Section 153A of Act. Supreme Court observed: This proposition of law laid down by High Court is correct, which is stated by Bombay High Court in impugned judgment as well. 28.5 above categorical pronouncement of Supreme Court cannot, by any stretch of imagination, be termed as obiter as has been suggested by Mr. Manchanda. Even obiter dicta of Supreme Court is binding on this Court. 29. search in case before Supreme Court was prior to 1 st June 2015. Apart from fact that Supreme Court approved above decision of Gujarat High Court holding that seized documents should 'belong' to other person, legal position in this regard where search has taken place prior to 1st June 2015 has been settled by decision of this Court in Pepsico India Holdings (P.) Ltd. (supra). In Vinita Chaurasia (supra), this Court reiterated above legal position after discussing decisions in Super Malls (P.) Ltd (supra) and Nau Nidh Overseas (P.) Ltd. (supra). essential jurisdictional requirement for assumption of jurisdiction under Section 153C of Act (as it stood prior to its amendment with effect from 1st June 2015) qua 'other person' (in this case assessees) is that Page 10 of 11 Downloaded on : Thu Oct 10 14:42:52 IST 2019 C/TAXAP/342/2019 ORDER seized documents forming basis of satisfaction note must not merely 'pertain' to other person but must belong to 'other person'. 18. Having heard Mrs. Mauna Bhatt, learned senior standing counsel appearing for Revenue and having gone through materials on record, we are of view that there is no good reason for us to disturb concurrent findings recorded by two revenue authorities as regards satisfaction arrived at by Assessing Officer without there being any cogent or tangible material. 19. Having regard to materials on record, if CIT, Ahmedabad and Appellate Tribunal relied upon decision of Delhi High Court in case of Pepsi Foods Private Limited, then, in our opinion, no error much less error of law could be said to have been committed in taking view that there is no cogent material for arriving at substantive satisfaction. 20. In documents, which were seized during course of search, there may be some reference of assessee, but that itself would not be sufficient. It is necessary to show some nexus on basis of some cogent materials between documents seized and assessee. 21. For forgoing reasons, this appeal fails and is hereby dismissed. (J. B. PARDIWALA, J) (A. C. RAO, J) aruna Page 11 of 11 Downloaded on : Thu Oct 10 14:42:52 IST 2019 Principal Commissioner of Income-tax 3 v. Himanshu Chandulal Patel
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