IN HIGH COURT OF DELHI AT NEW DELHI ITA 850/2019 COMMISSIONER OF INCOME TAX (EXEMPTION), NEW DELHI Appellant Through: Mr. Ajit Sharma, Senior Standing Counsel with Ms. Adeeba Mujahid, Junior Standing Counsel. Mr. Ashutosh Senger and Mr. Rishab Sharma, Advocates. versus U. P. DISTILLERS ASSOCIATION Respondent Through: Mr. S. Krishnan, Advocate. ITA 851/2019 COMMISSIONER OF INCOME TAX (EXEMPTION), NEW DELHI Appellant Through: Mr. Ajit Sharma, Senior Standing Counsel with Ms. Adeeba Mujahid, Junior Standing Counsel. Mr. Ashutosh Senger and Mr. Rishab Sharma, Advocates. versus U. P. DISTILLERS ASSOCIATION Respondent Through: Mr. S. Krishnan, Advocate. CORAM: HON'BLE MR. JUSTICE VIPIN SANGHI HON'BLE MR. JUSTICE SANJEEV NARULA ORDER 23.09.2019 C.M. No. 42491/2019 in ITA 850/2019 & C.M. No. 42492/2019 in ITA 851/2019 (delay) 1. By these applications, applicant seeks condonation of delay of 76 days in filing both applications. For reasons stated in applications, delay is condoned. 2. applications stand disposed of in aforesaid terms. ITA 850/2019 & ITA 851/2019 3. Revenue is in appeals to assail order dated 14.12.2018 passed by Income Tax Appellate Tribunal, Delhi 'E' Bench, New Delhi passed by ITAT in respect of ITA 3208/Del/2013 for assessment year 2005-06 and in ITA No. 2576/Del/2010 for assessment year 2003-04 whereby Tribunal has allowed appeals preferred by Respondent/assessee and set aside additions made by Assessing Officer in income of Respondent/assessee trust. admitted position of facts as emerging from record is that no search under Section 152 of Act was conducted in premises of Respondent/assessee. Merely survey under Section 133A was conducted. Consequently, invocation of Section 153A was not warranted and led to assessment order being passed making additions in income of Respondent/assessee on basis of documents being recovered which purportedly showed cash receipts by Respondent/assessee form its members. assessment was made by Assessing Officer on basis of said purported cash receipts found in documents upon conduct of survey under Section 133A of Act against assessee and upon conduct of search under Section 132 on premises of Secretary of Respondent Trust Shri R. K Miglani and on basis of statement attributed to said Shri R. K Miglani. relevant findings returned by Tribunal in impugned order read as follows: 199. If search warrant was never executed at premises of assessee, it leads to only one conclusion that assessee was never searched. If assessee was never searched u/s 132 of Act, assessments framed u/s 153A of Act are bad in law because provisions of section 153A provides for assessment in case of search or requisition. 4. In respect of additions sought to remain under Section 68 of Act, Tribunal observed as follows: 209. Adverting to facts relating to additions made u/s 68 of Act, we must first understand precondition for invoking provisions of section 68 of Act and precondition is that where any sum is found credited in books of assessee maintained for any previous year. No such entries are found -in books of assessee. What was found was merely notings in loose papers/spiral bound diaries. Whether entries in loose sheets can be construed as entries in books of account, Hon'ble Supreme Court in cases of Common Cause, Registered Society Vs. UOI 394 ITR 220 wherein Hon'ble Supreme Court considered following facts: "Raids were conducted on Birla and Sahara Group of Companies and incriminating materials inform ofrandom sheets and loose papers, computer prints, hard disk, pen drives etc. were found. Evidence of certain highly incriminating money transactions were also found. Question arises as to whether case was made out on bqsis of above materials, to constitute Special Investigation Team (SIT) and direct investigation against various functionaries/officers and further monitor same? And held as under: Loose sheets of papers are wholly irrelevant as evidence being not admissible under section 34 so as to constitute evidence with respect to transactions mentioned therein being of no evidentiary value. entire prosecution based upon such entries which led to investigation was quashed by this Court. [Para 20] Court has to be on guard while ordering investigation against any important constitutional functionary, officers or any person in absence of some cogent legally cognizable material. When material on basis of which investigation is sought is itself irrelevant to constitute evidence and not admissible evidence, whether it would be safe to even initiate investigation? In case it is done, investigation can be as against any person whosoever high in integrity on basis of irrelevant or inadmissible entry falsely made, by any unscrupulous$ person or business house that too not kept in regular books of account but on random papers at any given point of time. There has to be some relevant and admissible evidence and some cogent reason, which is prima facie reliable and that too, supported by some other circumstances pointing out that particular third person against whom allegations have been levelled was in fact involved in matter or he has done some act during that period, which may have co-relations with random entries. In case all these are not insisted, process of law can be abused against all and sundry very easily to achieve ulterior goals and then no democracy can survive in case investigations are lightly set in motion against important constitutional functionaries on basis of fictitious entries, in absence of cogent and admissible material on record, lest liberty of individual be compromised unnecessarily. materials which have been placed on record either in case of Birla or in case of Sahara are not maintained in regular course of business and thus lack in required reliability to be made foundation- of police investigation. [Para-21] In case of Sahara, in addition there is adjudication by Income Tax Settlement Commission. order has been placed on record Settlement Commission has observed that scrutiny of entries on loose papers, computer prints, hard disk, pen drives etc. have revealed that transactions noted on documents were not genuine and have no evidentiary value and that details in these loose papers, computer print outs, hard disk and pen drive etc. do not comply with requirement of Indian Evidence Act and are not admissible evidence. It further observed that department has no evidence to prove that entries in these loose papers and electronic data were kept regularly during course of business of concerned business house and fact that these entries were fabricated, non-genuine was proved. It held as well that PCIT/DR have not been able to show and substantiate nature and source of receipts as well as nature and reason of payments and have failed to prove evidentiary value of loose papers and electronic documents within legal parameters. Commission has also observed that department has not been able to make out clear case of taxing such income in hands of applicant firm on basis of these documents. [Para 22} It is apparent that Commission has recorded finding that transactions noted in documents were not genuine and thus has not attached any evidentiary value to pen drive, hard disk, computer loose papers, computer printouts. [Para 23] Since it is not disputed that for entries relied on in these loose papers and electronic data were not regularly kept during course of business, such entries were discussed in order passed in Sahara's case by Settlement Commission and documents have not been relied upon Commission against assessee and thus such documents have no evidentiary value against third parties. On sis of materials which have been placed on record, it is opined that no case is made out to direct investigation against any of persons named in Birla's documents or in documents of Sahara. [Para 24] In case of State of Haryana v. Bhajan Lai 1992 Supp (I) SCC 335, this Court has laid down principles in regard to quashing F.l.R. Court can quash FIR also if situation warrant even before investigation takes place in certain circumstances. This Court has laid down thus: (8) Where allegations made in first information report of complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out case against accused. (9) Where allegations in first information report and other materials, if any. accompanying FIR do not disclose cognizable offence, justifying investigation by police officers under section 156( 1) of Code except under order of Magistrate within purview of section 155(2) ofthe Code. (10) Where uncontroverted allegations made in FIR or complaint and evidence collected in support of same do not disclose commission of any offence and make out case against accused. (11) Where allegations in FIR do not constitute cognizable offence but constitute only non- cognizable offence, no investigation is permitted by police officer without order of Magistrate as contemplated u/s 155(2) of Code. (12) Where allegations made in FIR or complaint are so absurd and inherently improbable on basis of which no prudent person can ever reach just conclusion that there is sufficient ground for proceeding against accused. (13) Where there is express legal bar engrafted in any of provisions of Code or concerned Act (under which criminal proceeding is instituted) to institution and continuance of proceedings and/or where there is a, specific provision in Code or concerned Act, providing efficacious redress for grievance of aggrieved party. (14) Where criminal proceeding is manifestly attended with mala fide and/or where proceeding is maliciously instituted with ulterior motive for wreaking vengeance on accused and with view to spite him due to private and personal grudge. [Para 26} Considering aforesaid principles which have been laid down, it is opined that materials in question are not good enough to constitute offences to direct registration of FIR and investigation therein. materials should qualify test as per aforesaid decision. complaint should not be improbable and must show sufficient ground and commission of offence on basis of which registration of case can be ordered materials in question are not only irrelevant but are also legally inadmissibly under section 34 of Evidence Act, more so with respect to third parties and considering explanation which have been made by Birla Group and Sahara Group, it is opined that it would not be legally justified, safe, just and proper to direct investigation. [Para 27) 5. Therefore, in such circumstances, we are of view that no question of law arises for consideration in present appeals and same are dismissed. VIPIN SANGHI, J SANJEEV NARULA, J SEPTEMBER 23, 2019 Commissioner of Income-tax (Exemption), New Delhi v. U. P. Distillers Association