TaxTMI 
TaxTMI 
2021 (3) TMI 1159
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat no additions could be made u/s 153A on the basis of statement recorded u/s 132(4) and the power of the AO to assess or reassess total income u/s 153 A is restricted to the material found during search. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in relying upon the decision of Hon'ble Supreme Court in the case of CIT vs. Singhad Technical Education Society when the facts and circumstances of the instant case are different from that case. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred by ignoring the fact that the assessee during the assessment proceedings failed to produce the Directors of the company that gave accommodation entries to the assessee company and thereby failed to prove the genuineness and creditworthiness of the credits received in their books of account. 4. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred by not appreciating the fact that the statement of Sh. Mulchand Malu was provided to the assessee during the post search as well as assessment proceedings. During his statement, he being the promoter of the assessee company had admitted the u....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ter of Kuber Group of companies, including the assessee company. In the impugned assessment order, the Assessing Officer has mentioned that Sh. Mool Chand Malu during the course of search action in statement dated 15/12/2014 under section 132(4) of the Act, offered undisclosed income of estimated Rs. 150 crores, including investment in unexplained share capital. The Assessing Officer has further mentioned that, Sh. Mool Chand Malu again reaffirmed his declaration of undisclosed income of Rs. 100 crores towards share application money, share premium and unsecured loans. During assessment proceedings under section 153A of the Act, the Assessing Officer observed unsecured loans worth Rs. 2,47,00,000/- from 12 parties, a list of whom mentioned by the Assessing Officer in the impugned assessment order, is reproduced as under: (i) M/s. R.K. Investment Pvt. Ltd. Rs. 7,50,000/- (ii) M/s. Facor Enterprises Pvt. Ltd. Rs. 20,00,000/- (iii) M/s. Modular Enterprises Pvt. Ltd. Rs. 4,00,000/- (iv) M/s. Prabhat Management Services Pvt. Ltd. Rs. 20,00,000/- (v) M/s. Priti Mercantile Company Ltd. Rs. 35,00,000/- (vi) M/s. RAB Marketing Pvt. Ltd. Rs. 15,00,000/- ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arrants and shares and unsecured loans during the year to furnish all materials and supporting evidences that may be relevant to or useful to prove identity, capacity of the investor companies to invest and genuineness of transactions, Books of accounts maintained and the proofs for sources of the funds transferred to assessee's bank accounts. It is seen that assessee has failed to prove with the above requirement. 5.15 No real business appears to have been done by the company. No tangible assets are owned. After issuing commissions and making enquiries it has been reported by the Inspectors that the addresses of the companies were found to be for record purpose only & no business activities were found to be conducted at the premises. 5.16 The above lineup is just an example that how the unaccounted money is routed through the various paper companies. Formation and creation of such paper companies are systematically done by the entry operators especially in Kolkata. These companies do not have any infrastructure, no employees etc. As the paper companies have no source to make such investment the entire amount Is unaccounted money of Kuber Group introduced in t....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... The directors/key persons who conduct the affairs of companies have not been produced. The above findings buttress the admissions on repeated occassions of the promoter of Kuber Group, Shri Mulchand Maiu as discussed supra regarding undisclosed income on account of capital formation/share capital/share premium in the Kuber Group entities. In light of the above findings and in the facts of the case, the explanations and details furnished by the assessee company are not held to be satisfactory. The assessee cannot be held to have satisfactorily discharged its onus to prove the identity, genuineness and creditworthiness of the above lenders of unsecured loans. As per the facts discussed above the assessee company failed to prove the credits in his books of account in shape of unsecured loans and the same amount is chargeable to tax u/s 68 of the I T Act, 1961 as its income for the given assessment year. Therefore, it is held that the sum so credited in books by assessee company is to be charged to tax as the income of the assessee company for the year under consideration. 5.20 In view of above discussion, the amount of Rs. 2,47,00,000/- shown to h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....found during search. No incriminating material was found during search. (V) The additions made u/s 68 are not sustainable as the assessee appellant had submitted complete documents relating to the transactions at hand and had discharged onus cast upon it. 5.6 Regarding the first issue, the Ld. CIT(A) observed that the assessment order does not refer to any seized or incriminating material found during the course of the search and the entire addition is based upon the admission/statement u/s 132(4) of the Act of Sri Mulchsnd Malu, who was neither a director nor employee the assessee company. The Ld. CIT(A) relied on the decision of the Hon'ble Delhi High Court in the case of Kabul Chawla (supra) Mita Gutgatia (supra). The relevant part of the order of the Learned CIT(A) is reproduced as under: "I find that the additions made in the assessment order are not based on any incriminating material or documents found during search. In fact, the assessment order does not refer to any seized material or any incriminating material found during the course of search. This position of law (that addition u/s. 153A/153C can be made only on the basis of incriminating material e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Hon'ble Delhi High Court held in this order at para 38 as follows: "38. Fifthly, statements recorded under Section 132(4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Harjeev Aggarwal (Supra)." 5.8 In view of the detailed observation, the Ld. CIT(A) concluded that in the case, no incriminating material was found during the course of the search and no assessment order reassessment was pending on the date of the initiation of the search and therefore no addition could have been made in the instant assessment year. Accordingly, he deleted the addition of Rs. 2,47,00,000/- made under section 68 of the Act by the Assessing Officer. 6. Before us, the parties appeared through Video Conferencing facility. The assessee filed a paper-book electronically. In support of her contentions, the Learned DR also filed copy of statements of Late Sh. Mulchand Malu and his son Sh. Vinay Malu. 7. The learned DR strongly relied on the order of the Assessing Officer and submitted that Late Sh. Mulchand Malu in statement under section 132(4) of the Act offered undisclosed income of more than Rs. 150 Crores based on the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the third-party under section 132(4) without corroborating evidence does not constitute incriminating material as held in the case of Harjeev Aggrawal (supra) by the Hon'ble Delhi High Court and therefore in absence of an incriminating material no addition could have been made in completed assessment, following the decision of the Hon'ble judicial High Court in the case of Kabul Chawala (supra). 9. We have heard rival submission of the parties on the issue in dispute and perused the relevant metal on record. As far as decision of the Hon'ble Delhi High Court in the case of the Kabul Chawla (supra) is concerned, no addition could have been made in any assessment years if- (i) no incriminating material is found during the course of the search from the premises of the assessee. (ii) No assessment was pending as on the date of the search. 9.1 As far as second condition above is concerned, the assessee had filed his original return of income on 30/09/2009 declaring total income of Rs. 1,89,72,710/-. No notice under section 143(2) of the Act was issued till 30/09/2010, which was the limitation under which notice u/s 143(2) of the Act could have been issued. The ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the explanation to Section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the AO to make a block assessment merely because any admission was made by the Assessee during search operation. 21. A plain reading of Section 132 (4) of the Act indicates that the authorized officer is empowered to examine on oath any person who is found in possession or control of any books of accounts, documents, money, bullion, jewellery or any other valuable article or thing. The explanation to Section 132 (4), which was inserted by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1st April, 1989, further clarifies that a person may be examined not only in respect of the books of accounts or other documents found as a result of search but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Act. However, as stated earlier, a statement on oath can only be recorded of a person....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g any person by the authorised officer arises only when he found such person to be in possession of any undisclosed money or books of account. But, in this case, it is admitted by the Revenue that on the dates of search, the Department was not able to find any unaccounted money, unaccounted bullion nor any other valuable articles or things, nor any unaccounted documents nor any such incriminating material either from the premises of the company or from the residential houses of the managing director and other directors. In such a case, when the managing director or any other persons were found to be not in possession of any incriminating material, the question of examining them by the authorised officer during the course of search and recording any statement from them by invoking the powers under section 132(4) of the Act, does not arise. Therefore, the statement of the managing director of the assessee, recorded patently under section 132(4) of the Act, does not have any evidentiary value. This provision embedded in sub- section (4) is obviously based on the well established rule of evidence that mere confessional statement without there being any documentary proof shall not be us....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is a hardcore criminal. The nature of steps, taken during the course of search are sometimes frightening. Locks are broken, seats of sofas are mercilessly cut and opened. Every possible item is forcibly dissected. Even the pillows are not spared and their acts are backed by the powers of an investigating officer under section 94 of the Code of Criminal Procedure by operation of sub-section (13) of section 132 of the Act. The objective may be genuine, and the exercise may be legal. However, the freedom of a citizen that transcends, even the Constitution cannot be treated as non- existent." "18. It is not without reason that Parliament insisted that the recording of statement must be in relation to the seized and recovered material, which is in the form of documents, cash, gold, etc. It is, obviously to know the source thereof, on the spot. Beyond that, it is not a limited licence, to an authority, to script the financial obituary of an assessee." "19. At the cost of repetition, we observe that if the statement made during the course of search remains the same, it can constitute the basis for proceeding further under the Act even if there is no other material. If, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1TR 619/163 Taxman 608 to plead that loose sheets of papers should not be taken as a basis for determining undisclosed income. However, in the case on hand, loose sheets found during the search are not the sole basis for determining the tax liability. It is a piece of evidence to prove undisclosed income. The printout statements of undisclosed income is not disputed by the assessee and in his sworn statements it is accepted. In fact, he admitted that outstanding loans to be recovered are in the range of Rs. 25 Lakhs to 30 Lakhs. We find no error in the procedure followed by the Assessing Officer on admitted facts. The entire exercise by the department to bring to tax undisclosed income, we find has been generous and simple. There appears to be no confusion in the quantification of the tax liability and we uphold the order of the Tribunal." 9.7 Thus, we find that in the above decision addition has been sustained on the basis of the statement recorded of the assessee himself and not based on the statement of any third-party. The facts of above case are distinguishable from the facts of the assessee. 9.8 In view of the above facts and circumstances, we do not find any error in t....