AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (8) TMI 250
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....tion 68 of the Income Tax Act, 1961, on account of the statements made by the assessee's Directors in the course of search under Section 132 of the Act were not justified?" 3. In the other appeals, ITA Nos. 13 to 20 and 22 of 2017, the question of law framed by this Court by the order dated 21st March, 2017 reads as under: "Whether having regard to the materials seized in the course of search under Section 132 and the statements made on behalf of the assessee, additions made by the Assessing Officer under Section 153A, were not justified as held by the ITAT?" Background facts 4. The facts which lead to the filing of these appeals are that a search took place in the case of both Mr. Tarun Goyal as well as the Best Group of Companies on 15th September, 2008. During the search various loose papers were found. According to the Revenue, the seized documents were with regard to unaccounted receipts from sale of certain properties and unrecorded expenditure in the construction business. 5. In support of its assumption of jurisdiction under Section 153 A of the Act, the Revenue places reliance on the statements of Mr. Tarun Goyal and Mr. Anu Aggarwal as recorded on the d....
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....Netaji Subash Place, Pitampura, New Delhi to confront your statement with them. However they refused any such confrontation or cross examination. Ans. I confirm that I was taken to the office of Best Group of Companies for confrontation/cross examination by the directors of the company however they refused any such cross examination/confrontation regarding transactions mentioned in my answer to Q. No. 2 of this statement. Q. No. 6 Please mention the name of the companies and the bank accounts which are used for the purpose of accommodation entries as stated by you in the answer to question No. 5. Ans. Though I do not remember exactly the name of the companies and name of the bank accounts which are used for accommodation entry purpose however I confirm that the accounts of M/s Max-well Securities (P) Ltd. are mostly used for accommodation entries. Regarding rest of the companies and bank accounts used for the purpose can be stated by me after going through the records, which I will submit later on. Q. No. 7 Please state for the last six years what amount of accommodation entries have been given by you through the entities controlled by you. Please also give the name of ....
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.... companies of Best group for the last six year. Ans. I will be providing these details in due course of time as the computer prints is being taken out. Q. No. 12 Please provide the details of share premium of various companies of M/s Best Group for the last six years. Ans. I will be providing these details in due course of time as the computer prints is being taken out. Q. No. 13 Please provide the details of secured loans raised by you for your various projects and also give details of the security provided against the secured loan. Ans. We have taken a secured loan of Rs. 16 Cr from Bank of Baroda, Naharpur, Rohini, New Delhi in our company M/s Best City Developers (I) (P) Ltd. against the security of our flat no. 14 and No. 26 both situated at Sector-20, Dwarka, New Delhi. Q. No. 14 Please provide the details of unsecured loans raised by you for your various projects by your various companies, during last six years. Ans. I am not able to give an immediate reply and I could give details of the unsecured loan after going through the looks of accounts in short time. Q. No. 15 I am showing you Annexure A-I of party BO-1 page No. I to 71, which gives details o....
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....quired information is being produced/submitted today itself. Q.No.5 During the course of search cash of Rs. 59,96,800/- was found and as per the books total cash in hand was Rs. 30,01,000/-. Please explain the difference and give explanation. Ans: The cash in question was received from different persons on account of advance on account of sale of properties. As I have already mentioned in my earlier statement dated 15-09- 2008 to question No. 15 where I had clearly mentioned that we have received cash from different persons in lieu of bookings of properties. I may clarify that the amount of Rs. 8 crores surrendered at the time of search, includes this unexplained cash of Rs. 30 Lacs (Approximately.) Q. No. 6 During the course of search on Sh. Tarun Goyal, he has stated in his statement that he has provided you accommodation entries. Please explain the same. Ans. I personally do not know Sh. Tarun Goyal, except that he may have invested in our group companies. However we have not received any accommodation entries from anybody. I have already given my statement on 15-09-2008 in which in my answer to question no. 15. I had surrendered a total amount of Rs. 8 Cr. on accoun....
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.... gave his statement. In his statement Sh. Anu Aggarwal had surrendered an amount of Rs. 8 Crores on account of undisclosed income earned during the year on account of unexplained cash receipts, unexplained work in progress as well as the share capital and share premium received. Do you agree with the statement given by Sh. Anu Aggarwal? Ans. Yes I agree with the statement given by Sh. Anu Aggarwal. He is fully authorized to take decision in the best interest of the Group. I stand by his statement and promise to pay tax liabilities within the time allowed by the Department. Assessment Order 11. Although separate assessment orders were passed in respect of each Assessees for the AYs in question, illustratively, the assessment order dated 30th December, 2010 passed by the Assessing Officer ('AO') in the case of Best Infrastructure (India) Pvt. Ltd. For AY 2005-06 is being discussed herein. 12. In the above assessment order, the AO set out a tabulated chart on the basis of the above statements of Mr Tarun Goyal and Mr Anu Aggarwal and concluded that the share premium and share application money was nothing but an unexplained credit and accordingly added Rs. 3.60 Crores to t....
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.... had stated under Section 132(4) of the Act that he had received cash from Best Group and in return he had given them share capital in the form of a cheque. It was observed by the CIT (A) that the evidence "does not mean only documentary evidence. Judicially it has been held that statement under Section 132(4) is an important evidence collected as a result of search and seizure operation. Therefore, I hold that in the instant case the addition of share capital is based on evidence gathered during the search." 17. Reference was made by the CIT (A) to the decision of this Court in CIT v. Anil Kumar Bhatia (2013) 352 ITR 493 (Del) where it was held that the AO had the jurisdiction under Section 153A of the Act to make assessment for all the six years and compute the total income of the Assessee, including the undisclosed income, notwithstanding that the Assessee filed returns before the date of search which stood processed under Section 143 (1) of the Act. Therefore, the challenge to the assessment orders on the ground of erroneous assumption of jurisdiction under Section 153A of the Act was negatived by the CIT (A). 18. As regards the merits of the additions made under Section ....
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.... to hold that share capital was unexplained under Section 68 of the Act. In support of this proposition, reliance was placed on the decision of this Court in CIT v. Victor Electrodes Ltd. (2012) 329 ITR 271 (Del). 20. A request was made by the Assessee during the appellate proceedings before the CIT (A) for admission of additional evidence in the form of bank statements of the share holders. This application was forwarded by the CIT (A) to the AO who by his letter dated 25th October, 2012 opposed to the admission of the additional evidence. Even then, the CIT (A) admitted the additional evidence and directed the AO to conduct an enquiry. In pursuance to which, the AO by letters dated 10th July and 19th August, 2013, submitted the remand report. The AO stated that the summons under Section 131 were issued to Mr. Goyal but he did not appear. Then the AO requested Mr. Harjeet Singh and Mr. Anu Aggarwal to produce Mr. Tarun Goyal to which they replied that they "do not presently know the whereabouts of Mr. Tarun Goyal." The AO maintained that during the entire course of the assessment proceedings, the Directors of the Best Group had never demanded to cross- examine Mr. Goyal. 21.....
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....tanding counsel for the Revenue, has submitted that the statement of Mr. Tarun Goyal remained unrebutted as the Assessees never sought to cross-examine him. Secondly, the statement of Mr. Anu Aggarwal surrendering Rs. 8 crore in the course of search and also his admission of receiving accommodation entries was itself incriminating material for the purposes of assumption of jurisdiction under Section 153A of the Act. In support of his contention, learned counsel for the Revenue placed considerable reliance on the decision of this Court in Smt. Dayawanti Gupta v. CIT (2016) 390 ITR 496 (Del) and sought to distinguish the judgment of this Court in Commissioner of Income Tax (Central-III) v. Kabul Chawla (2016) 380 ITR 573 (Del). He submitted that apart from the above, the documents A-1, A-4 and A-11 that were seized during the search, also constituted incriminating material. According to him, there was no requirement that incriminating material qua each of the AYs, for which the addition was made, needed to exist. He relied upon the observations of this Court in the decision in CIT v. Anil Kumar Bhatia (supra). He also sought to distinguish the recent decision of this Court in Princip....
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....t be produced for cross-examination, therefore, no reliance could be placed on his statement. Analysis and reasons 31. In Principal Commissioner of Income Tax Central-2, New Delhi v. Meeta Gutgutia (supra), this Court had considered the entire gamut of case law on the assumption of jurisdiction under Section 153A of the Act. In Principal Commissioner of Income Tax Central-2, New Delhi v. Meeta Gutgutia (supra) this Court had the occasion to extensively discuss the decision in Smt. Dayawanti Gupta v. CIT (supra) to point out why the said decision was distinguishable in its application to the facts of the former case. However, since the same arguments have been advanced by the Revenue in the present case, the said decision in Smt. Dayawanti Gupta v. CIT (supra) is being again discussed herein. 32. In Smt. Dayawanti Gupta v. CIT (supra) the Assessees were dealing in the business of pan masala, gutkha, etc. Firstly, the Assessees therein were, by their own admission not maintaining regular books of accounts. Secondly, they also admitted that the papers recovered during the search contained "details of various transactions include purchase/sales/manufacturing trading of Gutkha,....
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....w explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the. aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or info....
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....pursuant to search and seizure operation, the assumption of jurisdiction under Section 153A of the Act would be vitiated in law. This is one more occasion for the Court to reiterate that legal position. 36. Turning to the facts of the present case, it requires to be noted that the statements of Mr. Anu Aggarwal, portions of which have been extracted hereinbefore, make it plain that the surrender of the sum of Rs. 8 crores was only for the AY in question and not for each of the six AYs preceding the year of search. Secondly, when Mr. Anu Aggarwal was confronted with A- 1, A-4 and A-11 he explained that these documents did not pertain to any undisclosed income and had, in fact been accounted for. Even these, therefore, could not be said to be incriminating material qua each of the preceding AYs. 37. Fourthly, a copy of the statement of Mr. Tarun Goyal, recorded under Section 132 (4) of the Act, was not provided to the Assessees. Mr. Tarun Goyal was also not offered for the cross-examination. The remand report of the AO before the CIT(A) unmistakably showed that the attempts by the AO, in ensuring the presence of Mr. Tarun Goyal for cross-examination by the Assessees, ....
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....cessary verification from the bank of the share applicant and no adverse finding is recorded by him in the remand report. Therefore, the facts on record are contrary to the allegation of the Revenue that the assessee gave cash to Shri Tarun Goyal and he, after depositing the same in the bank account of various companies, issued cheques for share application money. On these facts, the decision of Hon'ble Jurisdictional High Court in the case of Harjeev Aggarwal (supra) would be squarely applicable. Therefore, we hold that the statement of Shri Tarun Goyal cannot be used against the assessee because: (i) His statement was recorded behind the back of the assessee and the assessee was not allowed any opportunity to cross-examine him. (ii) There is no corroborative evidence in support of the statement of Shri Tarun Goyal. On the other hand, the material found during the course of search and other evidences placed on record by the assessee are contrary to the allegation made by Shri Tarun Goyal in his statement." 41. The Court has not been persuaded to hold that the above finding of the ITAT on the legal position regarding the Revenue being disabled from relying on the state....
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.... of Payment as under: Chq. No. Date Amount (Rs.) Bank Branch 474604 15.03.2008 100,00,000 HDFC Bank Ltd. New Delhi 474615 25.03.2008 50,00,000 HDFC Bank Ltd. New Delhi Total 150,00,000 Bank Account No. 003142340000152 Bank Particulars: HDFC Bank Limited Ansari Road, Darya Ganj, New Delhi - 110 002 Source of funds: Out of sale of shares Occupation: Business Income Tax PAN Number: AADCA5439P Ward 1(3), New Delhi. Share Certificates Received: Yes We do hereby confirm that the information furnished above is correct. For Aries Crafts Private Limited Sd/- Authorised Signatory 46. From the above, it is evident that the share applicant company has given the confirmation on its letter head which gives the complete address of the said company. In the confirmation, number of shares applied and the amount invested has been given. Details of payments i.e., cheque number, date of cheque and name of the bank on whom cheque is drawn is given. Address of the bank and bank account number h....