IN HIGH COURT OF DELHI AT NEW DELHI ITA 1152/2017 PR. COMMISSIONER OF INCOME TAX CENTRAL-3 Appellant Through: Ms. Vibhooti Malhotra, Sr. Standing Counsel. versus M/S. DREAMCITY BUILDWELL PVT. LTD. Respondent Through: Mr. Salil Aggarwal with Mr.Madhur Aggarwal and Mr.Uma Shankar, Advocates. CORAM: JUSTICE S.MURALIDHAR JUSTICE TALWANT SINGH ORDER % 09.08.2019 Dr. S. Muralidhar, J.: 1. This is appeal by Revenue against order dated 30th January, 2017 passed by ITAT in ITA No.4766/Del/2009 for Assessment Year ( AY ) 2005-06. 2. question sought to be urged by Revenue is whether ITAT erred in deleting addition of Rs.2.12 crores made by Assessing Officer ( AO ) on account of unexplained cash credit under Section 68 of Income Tax Act, 1961 ( Act ) adopting restrictive and pedantic interpretation of scope of assessment under Section 143 (3) read with ITA 1152/2017 Page 1 of 11 Section 153C of Act? 3. background facts are that Assessee is company engaged in business of real estate development. It filed its return of income for AY in question, declaring NIL income. return was picked up for scrutiny and notice under Section 143(2) was issued to Assessee. In assessment proceedings under Section 143(3) of Act, AO noticed that Assessee had received credit entries in sum of Rs. 2.12 crores from one M/s. Shri Niwas Leasing & Finance Ltd. (SNLF). On account of failure on part of Assessee to establish identity, creditworthiness and genuineness of entry appearing in its books, AO added aforementioned sum to income of Assessee under Section 68 of Act by assessment order dated 28th December, 2007. 4. appeal by Assessee against above assessment order was allowed by Commissioner of Income Tax Appeals [CIT (A)] by order dated 14th October, 2009. reasoning given by CIT (A) was that SNLF was existing Assessee having PAN and that, therefore, identity of SNLF was not in doubt. money had been received by cheque and amounts had been utilised for making payments to MCD authorities. Therefore, transaction was genuine. Assessee had provided confirmatory letter as well as copy of bank account of SNLF. amount had been received by cheques and jurisdictional AO of SNLF had confirmed said facts. It was further noted that Assessee could not be fastened with burden of proving credits in accounts of SNLF. In other words, Assessee could not be asked to prove source ITA 1152/2017 Page 2 of 11 of source. Accordingly, addition made by AO was deleted. 5. Revenue filed appeal before ITAT being ITA No.4766/Del/2009. While said appeal was pending, search and seizure operation under Section 132 was carried out on 5th January 2009 in cases of Taneja Puri Group at its various premises. According to Revenue, during course of search, some documents belonging to Assessee were found in searched premises. Notice under Section 153C of Act was issued to Assessee on 19th November, 2010. 6. According to AO, in addition to credit entry of Rs.2.12 cores, Assessee had also received Rs.1.00 crore from six entities controlled and managed by Mr. S.K. Gupta, who was accommodation entry provider. According to Revenue, search in premises of Mr. S.K. Gupta revealed that six companies/entities were paper companies only for providing accommodation entries. assessment order dated 29 th December 2010 was framed against Assessee under Section 143(3) read with Section 153C of Act, determining its income at Rs.3.12 crores. 7. After CIT (A) dismissed Assessee s appeal by order dated 26th July, 2013 Assessee filed appeal being ITA No. 5201/Del/2013 in ITAT. By common order ITAT dismissed Revenue s appeal being ITA No.4766/Del/2009, upholding deletion by CIT (A) on merits of addition of Rs.2.12 crores made by AO under Section 68 of Act. ITAT allowed appeal of Assessee being ITA 5201/Del/2013, holding that assumption of jurisdiction under Section 153C of Act by AO ITA 1152/2017 Page 3 of 11 was not proper. 8. It must be noted at outset that Revenue filed two appeals in this Court against common order of ITAT in both aforementioned ITAs. Revenue s appeal against dismissal by ITAT of Revenue s appeal ITA 4766/Del/2009 (being ITA No.1153/2017), was by separate order passed today, treated as not pressed since tax effect was below revised monetary limit in terms of CBDT Circular No. 17 of 2019 dated 8th August 2019. 9. As far as present appeal is concerned question is whether AO s assumption of jurisdiction under Section 153 C of Act qua Assessee was justified in facts and circumstances of case? 10. For aforementioned purpose it must be noted that satisfaction note of AO for assumption of jurisdiction qua Respondent Assessee under Section 153C of Act read as under: search and seizure operation under section 132(1) of Income-tax Act was carried on 5.01.2009 at various business and residential premises of Taneja Puri Group of cases, Search and seizure proceedings were carried out at 9, K.G.Marg, New Delhi which is residence of Sh. Ravinder Kumar Taneja director in various Taneja Group of companies. Various Taneja group of companies are also being run from said premises. During course of search at said premises, various incriminating documents were found and seized. Annexure A- 2 of seized documents contains letter from Director Town and Country Planning, Haryana and Chandigarh addressed to assessee company Dreamcity Buildwell P. Ltd. along with other associated person of assessee group granting licence ITA 1152/2017 Page 4 of 11 to assessee company for setting up of residential plotted colony on land measuring 304.58 acres at Village Aterna, Nangal Ralan, Patla, Jakholi, and Sersa, Distt. Sonipat. said licence granted on basis of application dated 10.03.2005, 7.03.2005 and 26.04.2005 submitted by assessee to Director Town and Country Planning. In Annexure A-2, said letter has been page numbered as pages 82 to 86. Pages 87 to 96 of Annexure A-2 again letter dated 16.12.2005 from District Town Planner (HQ) NC for Director Town and Country Planning, Haryana and Chandigarh addressed to M/s. Dreamcity Buildwell P. Ltd. along with other associated persons of assessee granting permission for transfer of license number 65 to 98 of 2005 dated 5.08.2005 granted to assessee company for developing residential plotted colony in village Patti Mushalman and Shahpur, Distt. Sonipat, in favour of Rangoli Buildtech P. Ltd. In light of above, I am satisfied that above case is fit case for issuing notice under section 153C of Income Tax Act, 1961 as seized documents mentioned above belonging to Dreamcity Buildwell P. Ltd. being person than person in whose case search has been initiated, have been found during course of search and seizure proceedings at 9, K.G. Marg, New Delhi in case of Mr. Ravinder Kumar Taneja. During course of search and seizure proceedings at 28, Prithviraj Road, New Delhi residence of Mr. D.N. Taneja main controlling person of Taneja Group of companies, Mr. D.N. Taneja in his sworn statement given under section 132(4) of Income Tax Act, 1961 offered income of Rs.6.23 crore for taxation in respect of entries taken by various Taneja Group of companies from concerns of Mr. S.K. Gupta entry operator Mr. D.N. Taneja in his statement also provided list of all such transactions made by various Taneja group companies with concerns statement of Mr. D.N. ITA 1152/2017 Page 5 of 11 Taneja as Annexure to statement. As per said Annexure, assessee company Dreamcity Buildwell P. Ltd. has also undertaken various transactions on 27.04.2004 and 28.07.2004 with various concerns of Mr. S.K. Gupta. entire transactions with concerns of Mr. S.K. Gupta have been offered for taxation by Mr. D.N. Taneja in his statement. Therefore, for this reason also, I am satisfied that it is fit case for initiating proceedings under section 153C of Income Tax Act, 1961. 11. ITAT correctly noted that two of above documents referred to, viz., licence issued to Assessee by Director, Town and Country Planning (DTCP), Haryana and permission granted to it by DTCP for transferring said licence could not be said to be documents that constituted incriminating evidence revealing any escapement of income. In this context reliance was placed on decision of this Court in CIT v. RRJ Securities Ltd. (2016) 380 ITR 612 (Del) in which it was held that AO would not proceed to commence enquiry under Section 153C of Act if it was apparent that documents in question had no bearing on income of Assessee for relevant AYs. As far as statement of Mr. D. N. Taneja was concerned, ITAT held that they it was not in any way connected with undisclosed income of Assessee. offering of income of Rs.6.23 crores for taxation by Mr. D. N. Taneja did not make any reference to undisclosed income of Assessee. 12. Ms. Vibhooti Malhotra, learned Senior Standing Counsel for Revenue, submitted that while two documents, viz., licence issued to Assessee by DTCP and letter permitting it to transfer such ITA 1152/2017 Page 6 of 11 licence, could be said to belong to Assessee, they could not be said to be incriminating material relevant to any escapement of income of Assessee for AY in question. However, according to her, ITAT erred in overlooking third document, namely annexure to statement of Mr. D. N. Taneja, which showed that Assessee had also undertaken various transactions on 27th and 28th April 2004 with various concerns of Mr. S. K. Gupta, which admittedly were paper entities. Mr. S. K. Gupta was himself accommodation entry provider. Further, Mr. D. N. Taneja had offered for taxation entire transactions with concerns of Mr. S. K. Gupta. Therefore, said annexure was certainly document pertaining to Assessee. Consequently, according to Ms. Malhotra, assumption of jurisdiction qua Assessee under Section 153C of Act was valid. 13. Mr. Salil Aggarwal, learned counsel for Assessee drew attention of Court to fact that prior to its amendment with effect from. 1st June, 2015, Section 153C of Act read as under: 153C. Assessment of income of any other person 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. 14. After its amendment with effect from 1st June, 2015 Section 153C (1) of Act reads as under: ITA 1152/2017 Page 7 of 11 153C. Assessment of income of any other person (1) Notwithstanding anything contained in Section 139, Section 147, Section 148, Section 149, Section 151 and Section 153, where Assessing Officer is satisfied that, (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates 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 notice and assess or reassess income of other person in accordance with provisions of section 153A, if, that Assessing Officer is satisfied that books of account or documents or assets seized or requisitioned have bearing on determination of total income of such other person 2for six assessment years immediately preceding assessment year relevant to previous year in which search is conducted or requisition is made and for relevant assessment year or years referred to in sub-section (1) of section 153A 15. It can straightaway be noticed that crucial change is substitution of words books of account or documents, seized or requisitioned belongs to or belong to person other than person referred to in Section 153A by two clauses i.e. and b, where clause b is in alternative and provides that such books of account or documents, seized or requisitioned could pertain to or contain information that relates to person other than person referred to in Section 153A of Act. ITA 1152/2017 Page 8 of 11 16. trigger for above change was series of decisions under Section 153C, as it stood prior to amendment, which categorically held that unless documents or material seized belonged to Assessee, assumption of jurisdiction under Section 153C of Act qua such Assessee would be impermissible. legal position in this regard was explained in Pepsi Foods Pvt. Ltd. v. Assistant Commissioner of Income Tax (2014) 367 ITR 112 (Del) where in para 6 it was held as under: 6. 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 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 ITA 1152/2017 Page 9 of 11 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 . 17. In present case search took place on 5th January 2009. Notice to Assessee was issued under Section 153 C on 19 th November 2010. This was long prior to 1st June, 2015 and, therefore, Section 153C of Act as it stood at relevant time applied. In other words, change brought about prospectively with effect from 1st June, 2015 by amended Section 153C (1) of Act did not apply to search in instant case. Therefore, onus was on Revenue to show that incriminating material/documents recovered at time of search belongs to Assessee. In other words, it is not enough for Revenue to show that documents either pertain to Assessee or contains information that relates to Assessee. 18. In present case, Revenue is seeking to rely on three documents to justify assumption of jurisdiction under Section 153 C of Act against Assessee. Two of them, viz., licence issued to Assessee by DTCP and letter issued by DTCP permitting it to transfer such licence, have no relevance for purposes of determining escapement of income of Assessee for AYs in question. Consequently, even if those two documents can be said to belong to Assessee they are not documents on basis of which jurisdiction can be assumed by AO under Section 153C of Act. ITA 1152/2017 Page 10 of 11 19. As far as third document, being Annexure to statement of Mr. D. N. Taneja, is concerned that was not document that belonged to Assessee. Admittedly, this was statement made by Mr. Taneja during course of search and survey proceedings. While it contained information that related to Assessee, by no stretch of imagination could it be said to document that belonged to Assessee. Therefore, jurisdictional requirement of Section 153C of Act, as it stood at relevant time, was not met in present case. 20. For aforementioned reasons, this Court concludes that ITAT committed no legal error in holding that AO had wrongly assumed jurisdiction under Section 153C qua Assessee. ITAT, rightly, therefore, set aside order of CIT (A), which had held contrary. 21. No substantial question of law arises from impugned order of ITAT. appeal is accordingly dismissed. S. MURALIDHAR, J. TALWANT SINGH, J. AUGUST 09, 2019 tr ITA 1152/2017 Page 11 of 11 Pr. Commissioner of Income-tax, Central-3 v. Dreamcity Buildwell Pvt. Ltd