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2017 Supreme(Del) 3243
IN THE HIGH COURT OF DELHI AT NEW DELHI
S. MURALIDHAR, PRATHIBA M. SINGH, JJ.
Principal Commissioner Of Income Tax (Central)-2 - Appellant
Versus
Index Securities Private Limited - Respondent
ITA No. 566, 567, 568, 569, 570, 571 of 2017
Decided on : 04-09-2017
For the Appellant :Mr. Ashok K. Manchanda, Senior Standing counsel with Mr. Anand Chaudhuri, Advocate
For the Respondent:Mr. Salil Agarwal with Mr. Ravi Pratap, Advocates
Headnote:
Income Tax Act - Assumption of Jurisdiction under Section 153C - AY 2007-08, 2008-09, 2010-11 - [Summary of Acts and Sections: Section 260A of the Income Tax Act, 1961, Section 153C, Section 132, Section 143(3), Section 143(1), Section 68] - The court analyzed the validity of assumption of jurisdiction by the AO under Section 153C of the Income Tax Act, 1961. The court held that the seized documents must not merely 'pertain' to the other person but must belong to the 'other person'. The court also emphasized that the seized documents must be incriminating and must relate to the assessment years whose assessments are sought to be reopened. The court found that the essential jurisdictional requirements for assumption of jurisdiction under Section 153C were not met in the case of the two Assessees.
Fact of the Case:
The appeals by the Revenue under Section 260A of the Income Tax Act, 1961 were directed against the impugned orders passed by the Income Tax Appellate Tribunal (‘ITAT’) in two set of appeals involving two different Assessees but arising out of more or less the same set of facts and involving identical questions of law. The common question of law sought to be urged by the Revenue was whether the ITAT erred in confirming the order of the Commissioner of Income Tax (Appeals) [‘CIT (A)’] which held that no proceeding under Section 153C could have been initiated against the Assessees for the AYs in question since no incriminating documents belonging to the Assessee and relating to the AYs in question were found during search.
Finding of the Court:
The court found that the essential jurisdictional requirements for assumption of jurisdiction under Section 153C were not met in the case of the two Assessees.
Issues: Validity of assumption of jurisdiction by the AO under Section 153C of the Income Tax Act, 1961
Ratio Decidendi: The seized documents must not merely 'pertain' to the other person but must belong to the 'other person'. The seized documents must be incriminating and must relate to the assessment years whose assessments are sought to be reopened.
Final Decision: The appeals were dismissed as no substantial question of law arose from the impugned orders of the ITAT.
S. Muralidhar, J.
1. Notice. Mr. Salil Agarwal, learned counsel accepts notice on behalf of the Respondent. With the consent of learned counsels for the parties, these appeals are disposed of finally.
2. These appeals by the Revenue under Section 260A of the Income Tax Act, 1961 (‘Act’) are directed against the impugned orders passed by the Income Tax Appellate Tribunal (‘ITAT’) in two set of appeals involving two different Assessees but arising out of more or less the same set of facts and involving identical questions of law. Consequently, these appeals are being disposed of by this common order.
3. ITA Nos. 566/2017, 570/2017 and 571/2017, in which the Respondent Assessee is Index Securities Private Limited (‘ISRPL’), are directed against the order dated 26th August 2016 passed by the ITAT in ITA Nos. 430 to 432/Del/2014 for the Assessment Years (‘AY’) 2007-08, 2008-09 and 2010-11.
4. ITA Nos. 567/2017, 568/2017 and 569/2017, in which the Respondent Assessee is Vidhya Shankar Investment Private Limited (‘VSIPL’), are directed against the common order dated 28th September 2016 passed by the ITAT in ITA Nos. 6569 to 6571/Del/2013 for the AYs 2007-08, 2008-09 and 2009-10 respectively.
5. In both these sets of appeals, the common question of law sought to be urged by the Revenue is whether the ITAT erred in confirming the order of the Commissioner of Income Tax (Appeals) [‘CIT (A)’] which held that no proceeding under Section 153C could have been initiated against the Assessees for the AYs in question since no incriminating documents belonging to the Assessee and relating to the AYs in question were found during search.
Cases relating to ISRPL
6. As far as the Assessee, ISRPL, is concerned, the background facts are that on 14th September 2010 a search and seizure operation was conducted by the Investigation Wing of the Income Tax Department on the Jagat Group and its Directors, other individuals and connected associates at their business and residential premises. During the search a number of documents were seized.
7. As far as ISRPL is concerned, its Trial Balance and Balance Sheet for the period 1st April 2010 to 13th September 2010 were recovered from the searched person (and not the Assessee ISRPL). These were at Pages 97 and 98 of Annexure A-17. The Assessing Officer (‘AO’) of ISRPL prepared the following satisfaction note on 12th February 2013:
“During the course of the assessment proceedings in the case of M/s. Jagat Agro Commodities (P) Limited, it was noticed that during the search and seizure operation under Section 132 undertaken on 14th September 2010 in the case of M/s. Jagat Agro Commodities (P) Limited at 802, Ambadeep Building, K.G. Marg, New Delhi, a number of documents were found and seized from the above premises. Page No. 97 and 98 of Annexure A-17 were seized by party J-5. The seized documents contain trial balance and balance sheet of M/s. Index Securities & Research Pvt. Ltd. for the period 1st April 2010 to 13th September 2010.
2. The case of M/s. Index Securities & Research Pvt Ltd. has been centralized to this Circle vide letter F.No. CIT(C)-III/127/CC/2011-11/2553 dated 5th February 2013.
I am satisfied that the documents referred to above belong to M/s. Index Securities & Research Pvt. Ltd. warranting action under Section 153C in this case.”
8. On 13th February 2013, notice under Section 153C was issued to ISRPL seeking to reopen the assessment for the AYs 2005-06 to 2010-11.
9. The objection by ISRPL to the reopening of the assessments for the aforementioned AYs was rejected by the AO and an assessment order dated 28th March 2013 under Section 143 (3) read with Section 153C of the Act was passed separately for each of the AYs. As far as AY 2007-08 was concerned, the AO made an addition of Rs. 48,51,87,000 representing the share application money received from 16 investors. As far as AY 2008-09 was concerned, the AO made an addition of Rs. 55 crores representing share application money received from two in
