TaxTMI 
TaxTMI 
2021 (11) TMI 208
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....19 & CO No.73/MUM/2020 - A.Y.2011-12 3. First, we are dealing with ITA No.4041/Mum/2019 & CO. No.73/Mum/2020 for A.Y.2011-12. 4. The assessee in its Cross Objection has raised a legal issue challenging that the addition made of Rs..38,98,15,150/- by the Assessing Officer is itself without any jurisdiction u/s.153A of the Act in absence of any incriminating material found during the course of search and that the Ld. CIT(A) failed to appreciate that statements recorded during the course of search and transactions duly recorded in the books of account do not constitute incriminating material. 5. The brief facts of the case are that the assessee company was incorporated on 14.07.2008. For the year under consideration, it had been earlier assessed u/s.143(3) vide order dated 15.01.2014. Subsequently, a search action was carried out u/s.132 of the Act on 09.10.2014 at the offices of Patni group, their associates and at the residences of their Directors and it continued till 09.12.2014. Pursuant to the search action, notice u/s.153A(1)(a) dated 26.02.2016 was issued to the assessee. During the year under consideration, the assessee has obtained advances/ loans from M/s.Gulmohar Towers ....
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....ns over a period of time. In view of the said facts, Shri Khimji Patel had disclosed the same as undisclosed investment of M/s.Everfine Construction Pvt. Ltd. in M/s.Gulmohar Towers Pvt. Ltd. for the period starting from F.Y.2010-11 to F.Y.2013-14. The Assessing Officer also placed reliance of statements of Shri Anand Sharma recorded u/s.133A dated 02.07.2013 who is an alleged entry operator wherein he had explained the complete modus operandi of creating shell companies. Adopting the statement of Shri Anand Sharma, the AO in the impugned assessment order has stated that the same modus operandi had been exactly followed by the Patni group to introduce unaccounted funds in the form of accommodation entries. The Assessing Officer also made reference to statement of Shri Vivek Agarwal recorded u/s.131 dated 10.10.2014 wherein he had accepted that the loans received from M/s.Gulmohar Towers Pvt. Ltd. by his wife were mere accommodation entry received in lieu of cash. The fundamentals of M/s.Gulmohar Towers Pvt. Ltd. were analyzed by the Assessing Officer and he made his various observations to that effect in the assessment order. The company is not doing any business activity other tha....
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....andTreximPvt.Ltd. which were denied by him. The Assessing Officer made similar analysis of the financials of the said 3 companies and it was observed that the companies are not doing any business activities except rotating of funds and are only a tool to provide accommodation entries. In relation to M/s.Bhawna Computers P.Ltd, reference was made to statement of Shri Ankit Poddar recorded u/s.133A on 09.10.2014 wherein it was stated by him that he had no knowledge of the business activities of the 3 companies, he only received letters of the said companies and handed over the same to Shri Pradeep Poddar who was the director in those 3 companies. Similarly, even statement of Shri Amal Mondal was recorded during the course of survey on the same date wherein he had conceded that all the investments made by Bhawna are accommodation entries. Reference was also made to statement of Shri Mahesh Singhania wherein he had stated that Shri Amal Mondal was his employee. 5.3 Thus, based on the above facts, as per the Assessing Officer, the Lotus group have received huge amount either by way of share capital or unsecured loans/advances form the said 3 companies which were bought by the group in ....
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....ssessee had also produced Shri Pradeep Poddar for confirmation of the retraction affidavit wherein he had appeared on 22.12.2014 in response to summons issued u/s.131 of the Act. The Assessing Officer in the impugned assessment order did not buy any of the versions of Shri Pradeep Poddar mentioned in his police complaint and the retraction affidavit. Further, reference was also made to statement of Shri Parbat Gothi, main person of Kamdhenu Group which hold shares in the Lotus Group. In his statement recorded u/s.131 on 12.10.2014, he had confirmed that certain entities of his group namely M/s.Matashree Enterprises P Ltd, Pitashree Enterprise P Ltd, Pruthvi Builders and Shri Valji Manji Gothi had obtained accommodation entries by way of unsecured loans from M/s.RowlandTrexim Pvt. Ltd. Subsequently, his statement was retracted that it was given under pressure and undue influence from the search party but the same was not accepted by the Assessing Officer. 5.5 The Assessing Officer mentioned the fact that the Lotus Group could neither during the search nor in post search establish the genuineness of the transactions and could also not establish the money trail and show that the mone....
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....the impugned assessment order in its entirety, no specific incriminating material or asset or information in the form of any parallel books of account or unaccounted money etc. has been found against the assessee. Moreover, there has been no mention of the assessee in any of the so-called statements recorded by third parties to be involved in any such scheme of things and also submits that the statement recorded in the course of search/ survey of some other person cannot be considered to be an incriminating material found in the course of search of the assessee. It was highlighted that statement of Shri Anand Sharma was recorded much prior to the date of search. Statement of Khimji Patel, Shri Ankit Poddar and Shri Amal Mondal were recorded during survey u/s.133A of the Act and that of Shri Pradeep Poddar, Shri Ashok Agarwal and Shri Parbat Gothi were recorded in the course of search. The Ld. Counsel argued that recording of statements during search/survey cannot tantamount to material found in the course of search/survey rather these are creation during the search/survey. The Assessing Officer has proceeded to make additions as the assessee was a recipient of certain advances/ loa....
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.... the assessee and as such no incriminating material except for general findings and statements of third parties has been found based on which the addition has been made. The addition of advances/ loans has been made which are forming part of the regular books of account of the assessee. It was once again reiterated that no incriminating material in the form of parallel books of account, unaccounted money etc. was found to make such addition and that such addition made on transactions duly recorded in the regular books of account is without any jurisdiction u/s.153A of the Act. With respect to assessments for unabated years being made only on incriminating materials, the ld. Counsel placed reliance on the following judicial pronouncements: (i). CIT v. SKS Ispat and Power Ltd. (ITA No. 1874 of 2014 and 58 of 2015) (Bom HC) (ii). CIT v. Murli Agro Products Ltd. [2014] 49 taxmann.com 172 (Bom HC) (iii). CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78and (iv). All Cargo Global Logistics Ltd. [2015] 374 ITR 645 (Bom HC). The Ld. Counsel finally submits that the total addition made of Rs..38,98,15,150/- by the AO is itself without any jurisd....
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....May, 2003, the Assessing Officer shall- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years; Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may....
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....h to make the assessment or reassessment u/s.153A of the Act. If a search operation does not lead to detection of undisclosed income as defined in chapter XIV-B, then no purpose would be served in reopening the assessment already completed. Therefore, in the present case, the matter boils down to the fact as to whether any incriminating material was found belonging to the assessee to make an assessment u/s.153A of the Act since it is an undisputed fact that the present year is an unabated year. The case for the instant year had already been earlier assessed to tax u/s.143(3) vide order dated 15.01.2015, the copy of which has been placed on record before us. 9.1 On a perusal of the impugned assessment order, it is noted that the Assessing Officer has discussed in depth about the search action conducted on Patni and Lotus Group and the general findings therein. He has categorically referred to statements recorded of various parties during the course of survey/ search wherein it has been stated by them that the impugned companies viz. M/s. Gulmohar Towers Pvt. Ltd. & M/s.Rowland Trexim Pvt. Ltd. are merely shell/ paper companies involved in dealing with accommodation entries. In case....
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....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 information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 15....
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.... 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. ...... However, as stated earlier, a statement on oath can only be recorded of a person who is found in possession of books of accounts, documents, assets, etc. Plainly, the intention of the Parliament is to permit such examination only where the books of accounts, documents and assets possessed by a person are relevant for the purposes of the investigation being undertaken. Now, if the provisions of Section 132(4) of the Act are read in the context of Section 158BB(1) read with Section 158B(b) of the Act, it is at once clear that a statement recorded under Section 132(4) of the Act can be used in evidence for making a block assessment only if the said statement is made in the context of other evidence or material discovered during the s....
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....tion 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 used in evidence against the person who made such statement. The finding of the Tribunal was based on the above well settled principle." 23. It is also necessary to mention that the aforesaid interpretation of Section 132(4) of the Act must be read with the explanation to Section 132(4) of the Act which expressly provides that the scope of examination under Section 132(4) of the Act is not limited only to the books of accounts or other assets or material found during the search. However, in the context of Section 158BB(1) of the Act which expressly restricts the computation of undisclosed income to the evidence found during search, the statement recorded un....
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....g them as incriminating material for the purpose of section 153A of the Act does not arise at all. On the other hand, the Ld. DR could not produce any material to suggest that the assessment made u/s.153A for the year under consideration and the consequent additions were based on any seized material revealing undisclosed income of the assessee. He has simply relied upon the orders of the lower authorities and contended that the findings unearthed during the course of search constitute incriminating material for justifying the assessment u/s.153A of the Act. We are unable to appreciate the above argument since there is nothing even apparent to prove anything incriminating against the assessee except for statements of third parties alone. 9.4 Also, we find merit in the contention of the Ld. Counsel that transactions duly recorded in the regular books of account do not constitute incriminating material. In the instant case, the advance and loan obtained from Gulmohar Towers Pvt. Ltd. & M/s.Rowland Trexim Pvt. Ltd. respectively have been duly recorded in the books of account based on which return of income was filed and the same can by no stretch of imagination be construed as incrimi....