TaxTMI 
TaxTMI 
2022 (9) TMI 1367
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..... 162/JP/2020, C.O. No. 14/JP/2020 (Arising out of ITA No. 162/JP/2020), ITA No. 160/JP/2020, C.O. No. 12/JP/2020 (Arising out of ITA No. 160/JP/2020), ITA No. 156/JP/2020, C.O. No. 10/JP/2020 (Arising out of ITA No. 156/JP/2020) Dr. S. Seethalakshmi, JM And Shri Rathod Kamlesh Jayantbhai, AM For the Assessee : Shri Manish Agarwal (C.A.) For the Revenue : Shri P.R. Meena (Pr.CIT) ORDER PER BENCH: All these appeals have been filed by the department in the case of respective assessee against the respective orders of the learned Commissioner of Income Tax (Appeals)-4, Jaipur [hereinafter referred to as ld.CIT(A)']. Since the issues involved are common, all these revenue appeals were heard together and are being disposed off by this consolidated order. Against the department appeal there are cross objections filed by the respective assessee. 2. At the outset, the ld. AR has submitted that the matter pertaining to Shri Ramesh Kumar Mantri in ITA no. 165/JPR/2020 & Co. No. 16/JPR/2020 may be taken as a lead case for discussions as the issues involved in the lead case are common and inextricably interlinked or in fact interwoven and the facts and circumstances of othe....
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....ayment of interest which is duly recorded in the books of accounts of assesse and not on the excess amount as alleged by Ld.AO and further confirmed by Ld.CIT(A). Appellant prays that such observation being incorrectly made deserves to ignored and excluded and the consequent addition so confirmed by Ld. CIT(A) by relying such observation, deserves to be deleted. 2. That the appellant craves the right to add, delete, amend or abandon any of the grounds of this cross objections at the time or before the actual hearing of the case." 6. The brief facts of the case as culled out from the records is that a search and seizure actions u/s. 132 of the Act and/or survey action u/s. 133A of the Act was carried out by the Income Tax Department on the members of the Marverick Group, Jaipur on 22.07.2015 of which the assessee is one of the members. During the course of the above referred actions, cash Jewellery, valuables, stock-in-trade, documents, books of account and / or loose papers found and or seized from the premises of the Maverick Group Jaipur of which one such member happens to be the assessee. In this case original return of income was filed on 10.09.2011 for the A.Y. 201....
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....ors/Syndicate members/Brokers which were providing accommodation entries in statements recorded during action u/s 133A of the I.T. Act. It has been manifestly accepted by them that such penny stock companies are the conduit for converting untaxed money brought on record by paying no taxes in the garb of exempted income. It is further detected that M/s Splash Media & Infra Ltd. (Scrip Code-512048) is a penny stock listed company. It has very small capital base but its market capitalization is multifold to its capital base. Further, information in respect of trading in penny stock i.e. M/s Splash Media & Infra Ltd. is also available at ITD Data/AIR. 9.1. As per the details furnished by the assessee, it is noticed that the assessee claimed exemption u/s 10 (38) of the Income Tax Act, 1961 as tabulated here in below:- Name of scrip Quantity Date of Purchase Cost of purchase Date of sale Sale proceeds Long term capital gain SPLASH MEDIA 10,70,000 15.04.2009 15,75,945/- 11.02.2011 12,11,78,965/- 11,96,03,020/- 9.2 On examination of the share sale transactions made by the assessee during the Year, it was found that the entire sal....
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....ment order at para 9.4, 9.4.1, 9.4.2 wherein the ld. AO has placed on record the balance sheet of the company and various facts as extracted from the web site of Money Control. The ld. AO has also extracted the key financial ratios of the said company and were part of the order. The AO observed that the company's share prices were on the higher side and in bell shape and then he has commented that the company has no major turnover and assets. Based on these analysis ld. AO observed that the company was merely a paper company based on the said findings the ld. AO concluded that the reasons of astronomical price rise. The learned AO has also recorded the movement of share price from 01.01.2009 to 01.08.2017 based on the aforesaid tabulated information ld. AO reveals that the steep decline of share price without any big loss to the company or any corporate disallowance of sale etc. also suggests that price movements were manipulated. Based on the price pattern has also drawn chart. Based on the said observations he alleged that the scrip has been made specifically for the purpose of providing bogus long term capital gain to beneficiaries. 10. The ld. AO further stated that the SEBI....
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....crip worked in tandem to achieve the predetermined objectives. The ld. AO citing report of 11 members special Investigation Team (SIT) of the Hon'ble Supreme Court of India on black money given a report about the misuse of long term capital gain for money laundering was extracted in the order. Based on all these finding a show cause notice was issued to the assessee extracting all these averments made by the AO and relying on the statement on oath given by the assessee u/s 132(4) of the Act wherein the assessee has declared additional income of Rs. 11,96,03,020/- which was not declared in the return of income denying the benefit of section 10(38) and asking the assessee to show cause as to why the same should not be added u/s 68 of the Act to the total income of the assessee and also to show cause as to why the amount of Rs. 71,76,181/- be added u/s 69C of the Act being unexplained expenditure incurred by way of commission paid to arrange bogus entry of long term capital gains. In response to the above show cause notice, the assessee submitted a detailed reply which is also part of the order of the assessment. The ld. AO stated that the reply of the assessee and based on his findin....
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.... Date till which notice 143(2) can be issued Remark 2010-11 06-10-2010 30-09-2011 Assessment completed 2011-12 10-09-2011 30-09-2012 Assessment completed 143(2) notice time: 6 months from the end of the F.Yr. in which return is filed. 10.2 It is clear from the table above that assessment for the A.Yrs. 2012-13 & 2013-14 stood completed on the date of search and there was no time left to issue the notice u/s 143(2). In case of completed assessments the law permits to make additions only on the basis of incriminating seized material found & seized during the course of search. Remand proceedings 11. Before a discussion is made it may be pointed out that this office wrote letters for A Yr 2010-11 & 2011-12 dated 27-07-2018 to the Ld. AO asking specifically that whether any incriminating material was found during the course of search or not. The letter for the A Yr 2010-11 reads as under: Please refer to the above. It is seen that the AD while completing the assessment u/s 143(31/153A has made the addition in respect of the Long Term Capital Gain (LTCG) of Rs. 33,36,321/- declared by the appellant in this connectio....
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.... III. Copy of the statement, of Sh. Anil Agrawal dt 12.4.2015 enclosed herewith wherein he has stated that the price of script sold by the assessee was managed by him in stock market. IV. Any enquiry report of SEBI or other government agency is not available on record. V. No such information found on record. In the above context it is submitted that the all the above statement have been made as part of assessment order by the Assessing Officer. 11.3 Perusal of the remand report shows that no incriminating material was found during the course of search. 12. Recently Hon'ble Supreme Court vide order dated 02-07-2018 in Meeta Gutgutia Vs. Pr CIT (96 Taxmann.com 468) have held that Invocation of section 153A to re-open concluded assessments of assessment years earlier to year of search was not justified in absence of incriminating material found during search qua each such earlier assessment year. The head note of the judgment is as under:- Section 153A of the Income-tax Act, 1961 Search and seizure (General principles) Assessment years 2001-02 to 2003-04 and 2004-05 High Court in impugned order held that invocation of section 1....
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....o 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 mode 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 mode without any relevance or nexus with the seized material. Obviously assessment has to be made under this Section only on the basis of seized material" v. In absence of any incriminat....
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....32(1) of the Act & on the date of search the assessment stood completed. The additions made by the AO on the basis of statement of entry operator, Shri Anand Sharma, recorded much prior to the search were directed to be deleted. The grounds raised by the appellant before the tribunal, in Kota Dall Mill, was as under: Assessee's grounds: 1. On the facts and in the circumstances of the case and in law the order passed u/s 153A read with section 143(3) of the Income Tax Act 1961 is bad in law, void ob-initio, and deserves to be annulled as the assessment for the year under consideration was not abated as on the date of search and CIT (A) erred in holding that the contention of the assessee cannot be accepted in view of SLPS admitted in various cases. The id CTF (A) further erred in holding that the additions are to be adjudicated on ments as per relevant ground of appeal hence the issue remains for academic discussion only 2. On the facts and in the circumstances of the case and in law the id. CIT(A) erred in not declaring the assessment order as bad in low and void ab initio. The findings of id CIT (A) in this regard are perverse and erroneous it is con....
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....g the course of search under section 132 of the Act on 2nd July 2015 no material much less incriminating material was either found or seized to disclose any undisclosed income on account of unsecured loans or partners' capital received by the assessee firm. The AO has proposed to make the addition on account of unsecured loans and partners' capital under section 68 being unexplained cash credit solely on the basis of the information received from Investigation Wing Kolkata. It is pertinent to note that the said information was available with the AO prior to the search conducted under section 132 of the Act in case of the assessee on 2nd July, 2015. Therefore, even the sole basis of assessments framed under section 153A of the Act is the information received from Investigation Wing Kolkataand statement of one Shri Anand Sharma, who is stated to be an entry operator and managed various concerns/companies including M/s Royal Crystal Dealers, one of the loan creditors of the assessee. Except the said statement and report of the Investigation Wing Kolkata, the AO has neither referred to or was having in possession of any material to indicate that the unsecured loans shown in the....
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....e Hon'ble Supreme Court. The relevant part of the finding of the Id. CIT (A) in para 3.2.2 and 3.2.4 of pages 35 and 36 are as under: "3.2.2 As per the provisions of this section where a search is initiated u/s 132 of the Act, the A.O shall issue a notice requiring the person searched to furnish his return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Once such returns are filed, the AO has to assess or reassess the total income of such six assessment years (emphasis supplied by me). (The decisive words used in the provisions are to assessee or reassess the total income). The A.O. is thus duty bound to determine the 'total income of the assessee for such six assessment years and it is obvious that 'total income' refers to the sum total of income in respect of which a person is assessable. The total income therefore will cover not only the income emanating from declared sources or any material placed before the Assessing Officer but from all sources including the undisclosed ones, or based on the....
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....g the search and seizure in the case of the assessee. Accordingly, in the facts and circumstances of the case and in view of the binding precedents on this issue in Court, the additions made by the AO while passing the assessment orders under section 153A for the assessment years 2010-11 to 13-14 are not sustainable and accordingly the same are liable to be deleted. We order accordingly. 13.2 Thus the crux of the above decision is that in case of completed assessment as on the date of search u/s 132(1) of the Act no addition can be made unless there is incriminating seized material found & seized during the course of search. The statement of entry operator cannot be considered as incriminating seized material found during the course of search. 13.3 I may add that the statement of appellant recorded u/s 132(4) of the Act or statement of 3rd party recorded u/s 131 of the Act or u/s 132(4) of the Act is NOT considered as incriminating material. A detailed discussion in this regard is in the following paras. 13.4 On the facts and in the circumstances of the case and considering the above, I am of the view that the legal ground taken by the appellant is tenabl....
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.... find the Ld. AO has based disallowance of claim u/s 10(38) of the Act on the basis of statement of entry operator & consequent report by the investigation wing and also the confession of appellant made u/s 132(4) of the Act (later retracted). Statement u/s 131 of the act or u/s 132(4) of the act alone cannot be construed as evidences 15. In the detailed submission made by the assessee it has vehemently argued that the settled position of law is that addition cannot be made simply on the basis of statement of the assessee or the 3rd person alone. The same has to be substantiated and corroborated either by post search enquiries or by linking the material found in search with the statements relied on. 15.2 I am in agreement with the Ld. A/R that it is a settled law that statement alone cannot be treated as incriminating material for the purposes of making addition for assessment completed u/s 153A/143(3). It has been held in many judgments that mere statement u/s 132(4) or u/s 131 is not sufficient to make an addition. A statement made must be relatable to incriminating material found during the course of search or the statement must be made relatable to ma....
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....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 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 1588 (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 search. A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger a block assessment. The undisclosed income of an Assessee has to be computed on the basis of evidence and material found during search. The statement recorded under Section 132(4) of the Act may also be used f....
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....TCG. Precedence of documentary evidences over oral evidence 17. The Ld. AO had issue a detailed SCN, which is based on report prepared by Kolkatta directorate. This SCN enclosed various statement of entry operator. This SCN was replied by the appellant by filing all the necessary documentary evidence relating to purchase and consequent payment through bank accounts, the sale of shares and receipt of proceeds in the Bank Account. The following documentary evidences were filed before the Ld. AO: Details filed APB pages Copy of summary sheet detailing purchases and sales of 42 Copies of contract notes 43-68 Copies of ledger account 69-78 Copies of bank account reflecting purchase and sale 79-87 Copy of dmat statement 88-93 Affidavit of Anil Agarwal, retracting statement given before. 94-99 17.2 Before proceedings further, It would not be out of place to discuss the decision of Hon'ble Supreme Court in the case of Pullangode Rubbers Produces CO Ltd (91 ITR 18) as observed as under: "It is no doubt true that entries in the account books of the assessee amount to an admission that the amount in question was....
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.... routed back to the appellant bank account. Considering the above documentary evidences clearly out weight the oral evidences relied upon. 1 18.3 Further the AO has discussed the abnormal rise I the share price of the penny stock without any under lying fundamentals. Recently Hon'ble ITAT Delhi in the case of Mukta Gupta Vs. ITO, ITA 2766/ DEL/2018 order dated 26-11-2018 have held that Capital gains cannot be treated as bogus solely on the basis that the price of the shares has risen manifold and the reason for astronomical rise is not related to any fundamentals of market. If the transactions are duly proved by trading from stock exchange and the documentation is proper, the gains cannot be assessed as unexplained credit or as unexplained money. It was further observed by the Hon'ble ITAT Jaipur Delhi that nowhere it has been found that assessee was in any manner found to be beneficiary of any accommodation entry under any inquiry or investigation. Once all these transactions are duly proved by trading from stock exchange, then to hold the sale of shares as unexplained credit or as unexplained money cannot be upheld. Not providing the cross examinations ....
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....ross-examine those dealer and what extraction the appellant wanted from them. 7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross - examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and made the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000 , order dated 17.2.2005 was passed remitting the case back the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. 1. In view the above, we are of the opinion that if the test....
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....one of the employee of the Company does not implicate that the entire premium collected all throughout the country and deposited in Benami bank accounts actually belongs to the assessee-company or the assessee-company had direct control on these bank accounts. Ultimately, the entire case of the revenue hinges upon the presumption that assessee is bound to have some large share in socalled secret money in the form of premium and its circulation. However, this presumption or suspicion how strong it may appear to be true, but needs to be corroborated by some evidence to establish a link that GTC actually had some kind of a share in such secret money. It is quite a trite law that suspicion howsoever strong may be but cannot be the basis of addition except for some material evidence on record. The theory of 'preponderance of probability' is applied to weigh the evidences of either side and draw a conclusion in favour of a party which has more favourable factors in his side. The conclusions have to be drawn on the basis of certain admitted facts and materials and not on the basis of presumption of facts that might go against assessee. Once nothing has been proved against the asse....
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....54 CCH 0344 * UDIT Agarwal vs. Dy. CIT (IT) (2018) 54 CCH 0424. Summation 22. To sum up in the present case the appellant as subjected to search and seizure action u/s 132(1) of the Act and during the course of search no incriminating material was found which may indicate that the appellant has taken LTCG on penny stock which is alleged bogus. A statement was recorded u/s 132(4) of the Act which was later retracted by the appellant. 22.1.1 The Ld. AO had information in the fotin of statements recorded during search and survey action on various entry operators. This information inter alia contains statements of entry operators recorded by investigation directorates, mainly Kolkatta. The Ld. AO issued a SCN to the appellant. The Ld. AO did not allow cross examination of the entry operator for the reasons enumerated in his order. 22.1.2 In response to the SCN appellant filed all the documentary evidences in his possession before the Ld. AO which were kept as it is & were not rebutted by virtue of any inquiry/ investigation. In remand proceedings the Ld. AO has reiterated the statements, later retracted, given during the course of search and....
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....ng the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return. In view of the above discussion in totality, the purchases made by the appellant from M/s Padmesh Realtors Pvt. Ltd. is found to be acceptable and the consequent disallowance resulting in addition to income made for Rs.19,39,60,866/-, is directed to be deleted 23. Considering the above I am of the view the appellant case is directly covered by the decision of Hon'ble Rajasthan High Court and various decision of Hon'ble ITAT Jaipur. The Ld. AO action in treating claim u/s 10(38) of the Act as bogus is not tenable. The Ld. AO is directed to allow the claim of LTCG for both the A.Yrs. Since he LTCG claimed u/s 10(38) of the Act is held genuine the consequent disallowance addition of commission u/s 69C is also directed to be deleted. In short the relief allowed is: A.Yrs LTCG claim Commission 2010-11 Rs 3336321 Rs 200179 2011-12 Rs 119603020 Rs 7176181 13. Before us the ld. AR of the assessee has submitted foll....
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....11-12 159/JPR/2020 1 & 2 5,77,76,606/- 34,66,596/- SangeetaMantri 2011-12 160/JPR/2020 1 & 2 5,68,18,858/- 34,09,131/- Mukesh Jain 2010-11 161/JPR/2020 1 & 2 33,35,476/- 2,00,129/- Mukesh Jain 2011-12 162/JPR/2020 1 & 2 12,03,91,598/- 72,23,496/- Anshul Jain 2014-15 163/JPR/2020 1 & 2 1,35,94,856/- 8,15,691/- Ramesh Kumar Mantri 2010-11 164/JPR/2020 1 & 2 33,36,321/- 2,00,179/- Ramesh Kumar Mantri 2011-12 165/JPR/2020 1 & 2 11,96,03,020/- 71,76,181/- Before we begin with submission on merits, it is submitted that assessments in respect of all the assessees were completed u/s 153A as a result of search conducted on 22.07.2015. On the date of search, due date of issuing notice u/s 143(2) had expired in respect of A.Y. 2010-11 to 2013-14 and notice could be issued only in respect of A.Y. 2014-15 and onwards. In other words, assessment proceedings upto A.Y. 2013-14 were completed and therefore scope of additions to be made in such assessment years was restricted to incriminating documents only which were found/seized during the course of search. A detailed su....
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....assessees recorded u/s 132(4) during the course of search, which were not supported with any other documentary evidences found as a result of search/otherwise. Detailed submission in this regard was submitted before ld.CIT(A), wherein it was explained the statements wherein surrender as obtained from all the persons regarding Long term capital gain/Short term capital loss were not voluntary and rather recorded under undue pressure. Moreover, such statements were retracted by filing affidavits as soon as copy thereof was supplied to assessee. Ld.CIT(A) after considering submission of assessees, allowed relief on legal ground. From the perusal of the grounds of appeal taken by the department in these appeals also, it appears that the department has not challenged the findings of ld. CIT(A) given on the legal issue raised by the assessee that, no addition could be made solely on the basis of confessional statements recorded during the course of search unless the same are corroborated with documentary evidences/material more particularly when statements were retracted. It is submitted that very recently Hon'ble Rajasthan High Court in the case of PCIT vs Shri Sanjay C....
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....tion u/s 10(38) is denied/Short term capital loss is added back were not the solitary transactions in shares. At this juncture, total LTCG/STCL earned by them, disallowance made and total portfolioas on the last date of balance sheet is tabulated in Annexure attached with this written submission for the sake of convenience.From the perusal of the chart annexed, it is evident that all the assessees have been regularly dealing in shares and hold shares of various companies other than alleged as penny stock companies also. Facts leading to the conclusion thatLong Term capital gain/Short term capital loss was non genuine based on the information received by the ld. AO where various searches were conducted by Income Tax department, during which statements were recorded u/s 132(4) of various persons (hereinafter referred to as "entry operators"), who have been alleged to have accepted to be involved in providing accommodation entries in the shape of Long Term Capital Gain/Short Term capital loss/ unsecured loans etc. for commission, through a racket of various paper companies. As per ld. AO the long term capital gain / short term capital loss declared by these appellants also in....
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....In fact, one of the persons named and whose statement was relied upon by the ld.AO is Shri Raj Kumar Kedia. Perusal of the his statement reproduced in the assessment order reveals that at one place Shri Raj Kumar Kedia has accepted to have done pre-arranged booking of LTCG from a number of companies including the names of scripts involved in this case, and immediately in the next para (as appearing in the Assessment order of Sh. MukutBehari Agrawalfor AY 2011-12 page49 last para) he has himself observed as under: "From the above listed shares of companies like Fact Enterprises ltd, Splash Media Ltd,..................did not pick up & no LTCG was done through them" Thus Shri Raj Kumar Kedia has in fact very clearly stated that no bogus LTCG was booked through them in the impugned two scripts involved in all the cases, which further proves the transactions as genuine. Further in the statement, Shri Kedia has given complete list of beneficiaries who had taken accommodation entries through him which does not contain the name of the assessee or the broker through whom the assessee had transacted in these shares. Also all the other names mentioned by Shri Raj Kumar Kedi....
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....orded of during search and surveys on various entry operators, - The Ld. AO did not allow cross examination of the entry operators; - appellant filed all the documentary evidences in his possession before the Ld. AO which were not rebutted by virtue of any inquiry/investigation; - In remand proceedings the Ld. AO has reiterated the statements, later retracted, given during the course of search and afterwards; - Ld. AO did not have SEBI report which specifically indicted either the appellants or the 'penny stock' script; - Thus, external information & retracted statement was formed whole & sole basis to treat the LTCG/STCL claim as bogus; - That, documentary evidences carry more weight than oral statements; - Thus, it was not evident from the information so received, nor investigated nor is answered by the whole exercise as to how was unaccounted cash routed through such entries; - All the decision of Hon'ble High Court of Rajasthan and Hon'ble ITAT Jaipur on LTCG earned on Penny stock are in favour of assessee's; - The judgment given in the case of Suma Poddar423 ITR 480, has alread....
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....olumns which had details regarding some calculation of amount with title "Adjustment". Ld. AO considered this amount appearing against the name of assessee in the last column as the interest paid over and above the interest paid through payees account cheque and recorded in the books of accounts and accordingly held the same as being interest paid by the assessee from its undisclosed sources and made the impugned addition. In this regard it is humbly submitted that during the course of assessment proceedings, first the ld. AO proposed to make addition of the entire amount found noted in the said sheets against the name of assessee as his undisclosed income in the form of advances given out of undisclosed sources. In response to it, detailed reply was given explaining the nature of entries contained in all the files found in the pen-drive seized during search operation. Printouts of excel sheets and replies filed before ld.AO are enclosed in respective paper books as under: Name of Assessee Assessment Year Excel Sheet APB Reply APB Ramesh Kumar Mantri 2010-11 72-73 66-71 2011-12 106-107 100-105 MukutBehari Agrawal 2010-11 89-90 8....
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....by the assessee or even by Shri KailashKhandelwal from whose possession it was found during search and ld.AO has not raised any doubt on the explanation tendered by the assessee. Thus the presumption embedded u/s 132 (4A) does not apply in this case. No statements whatsoever were recorded of Shri KailashKhandelwal in this regard from whose possession the said Pen Drive was found during the course of search. The assessee has fully explained the entries as appearing in the books of the assessee other than the ones appearing under the last column for which it was categorically stated that those entries were not made by assessee or his employee. This is further evident from the fact that assessee has deducted due tax on the amount of interest actually paid by him and the same is appearing as such in the excel sheets. The entries appearing in the 'adjustment' column was the additional interest asked by the lender, which was never paid by the assessee, as is evident from the fact that no TDS was deducted thereon nor any payment was made. Further no incriminating document was found during the course of search corroborating the allegation of ld. AO nor was anything brought on record by mak....
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....gh the SLP is admitted in the Supreme Court challenged by the department in the case of Continental Warehousing, Best Infrastructure. He has further relied on the recent decision of Calcutta High Court in the case of PCIT Vs. Swati Bajaj where in the issue is decided in favour of the revenue. He has reiterated the findings recorded by the ld. AO in his order and the investigation carried out by the Investigation Wing of the department. He has read the statement of the persons whose statements are relied upon. He has stated that the fact that the SEBI and Investigation Wing of the department has given so much of the material on the issue of bogus long term capital gain including the report of the SIT report he had relied upon. He has heavily relied on the statement recorded u/s. 132(4) of the Act wherein the assessee has accepted the amount as not genuine transactions and therefore, the same may be viewed in accordance with the confession made by the assessee. The statement is recorded before in the presence of the two witness and based on the confession the investigation was stopped and now the assessee cannot say that the statement is not correct. The ld. CIT(A) has not discussed ....
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....tion 131(1) the assessee has failed to produce or would not produce the books of accounts or other documents so requisitioned or (ii) the assessee is in possession of money, bullion, jewellery, article or thing which represents wholly or partly income has not been or would not be disclosed for the purpose of the act. Hence a conjoint reading of section 153A and 132(1) would clearly imply that a satisfaction to issue notice under section 153A is already deemed to be imported from the satisfaction recorded by PDIT(Inv) at the time of issuing warrants under section 132(1). The existence of satisfaction recorded by PDIT(Inv) is liable to be challenged before courts. Hence, until such satisfaction for issue of warrants under section 132(1) are held invalid by any court, the satisfaction recorded by PDIT(Inv) continued to hold the fort for purpose of 153A also and it is for this reason there is no further requirement of recording any belief of satisfaction by AO for issue of notice under section 153A. As may be noted from the conditions of recording the satisfaction of PDIT(Inv), one of the conditions is regarding books or other documents which were not produce....
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....tive nor have a different connotation for assessment under section 153Avisa-vis143(3) or 147. As per the scheme under the Act, the satisfaction recorded u/s132(1) and the results of search are intended to be brought to a logical conclusion by initiating the proceedings u/s153A without any further act of the AO. Hence it is in the scheme of the Act that after issuance of notice u/s153A, the next action of the AO must follow the examination of all aspects for which a search has been initiated. Hence, it cannot be said that the AO u/s 153A cannot proceed to examine the books of accounts or documents, entries which were produced before him subsequently, wherein might also represent income wholly or partly, which has not been disclosed for the purposes of the Act. Hence, it may be contrary to the scheme of the provisions of 132(1) r/w 153A, if it were to be held that power of AO is restricted only to make assessment the evidence found during search. The provisions of 153A not only require assessment of undisclosed income but total income also. The expression 'total income' would include the income emanating from disclosed items, income emanating from partly or wrongly disclosed item....
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....d section 153A, though have different conditions to assume jurisdiction but both operate to make the assessment of total income only. The Memorandum explaining the provisions of Finance(No.2) Bill of 2009 while inserting explanation 3 to section 147 reads as under: "Some courts have held that the Assessing Officer has to restrict the reassessment proceedings only to issues in respect of which the reasons have been recorded for reopening the assessment. He is not empowered to touch upon any other issue for which no reasons have been recorded. The above interpretation is contrary to the legislative intent. Therefore to articulate the legislative intent clearly, explanation 3 has been inserted in section 147 to provide that assessing officer may examine, assess or reassess any issue relevant to income which comes to his notice subsequently in the course of proceedings under this section, notwithstanding that the reasons for such issue has not been included in the reasons recorded under subsection(2)ofsection148". Hence, even in absence of any explanation u/s 153A also similar to the explanation 3 u/s 147, the intention of the legislature and the scheme of th....
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....sment years immediately preceding the assessment year relevant to the previous year in which the search took place. This, however, does not mean that the assessment under section153A can be arbitrary or made without any relevance or nexus with the seized material.....". Filatex India Ltd Vs CIT-IV 229 Taxman 555(Delhi) Whether during assessment under section153A, additions need not be restricted or limited to incriminating material found during course of search and, hence, argument of assessee that addition under section115JB was not justified in order under section 153A as no incriminating material was found concerning said addition had to be rejected -Held, yes. Sunny Jacob jewellers and wedding center Vs DCIT3 62 ITR 664(Ker) Whether there is no requirement under provisions of Act requiring department to collect information and evidence for each and every year for six previous years in order to initiate proceedings under section 153A-Held, yes. CIT Vs Anil Kumar Bhatia 352 ITR 493(Delhi) Whether even if assessment order had already been passed in respect of all or any of those six assessment years, either under section1....
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....g final adjudication before the SC in SLPs admitted. 2. Incriminating material: (i) The incriminating material for the purpose of making an assessment of total income u/s153A? (ii)Whether the mere fact that an entry has been considered in any earlier proceedings or that the entry/ income is recorded in accounts in the manner which is later found to be different from its true nature and source could take away its character of being incriminating for the purpose of making an assessment u/s153A? 2.1 The 'incriminating material' can be in any form such as evidence in the nature of i) a document, content of any document; ii)an entry in books of account; iii) an asset; iv) a statement given on oath; v) absence of any fact claimed earlier but coming to notice during search; vi) absence of books being found during search; or vii) absence of the office /business premises as claimed during returns filed or any other documents, etc. In short, any fact/ evidence which could suggest that the documents/ transactions claimed or submitted in any earlier proceedings were not genuine, ....
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....ets to income should only be a logical nexus to the ultimate process of determination of total income and that such evidence need not be in the nature of direct hard evidence. Applying the same principles, the incriminating material for the purposes of section 153A also has to be necessarily construed to be in the nature of a prima facie evidence only (including a circumstantial evidence) and not a hard evidence. The use of the expression 'books of accounts' u/s 153C again suggests that even the entries recorded in the books of accounts, which have not been correctly recorded or camouflaged would also par take the character of incriminating material, if the same has a bearing on the determination of income which has not beena lready disclosed in the return filed, ifa ny. Hence, the entries in the regular books of accounts would also trigger the assessment u/s 153A /C, if there is some prima-facie evidence that the entry recorded there in is camouflaged, or incorrect, wholly or partially, and such entries have a bearing on determination of total income of such person. The definition under clause(ii)of 271AAB(c) also defines undisclosed income as "any income based on entry in....
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....sought to prevent just because the entries were already recoded in the books or some documents had already been accepted. Hence applying the Hayden's rule of mischief, the mere fact that such entries are recorded in the books of accounts or some fabricated or colourful documents have already been accepted as correct, will not prevent such material or entry from being incriminating, if the circumstances suggest other wise. The Hayden's rule of mischief has been judicially accepted and applied by Calcutta High Court in Reckitt Colman of India Ltd. vs. ACIT (2001) 252 ITR 550(Cal). The incriminating material can be from the search or even from subsequent surveys or any other enquiries. Recently in CIT Chennai vs Aji S Kumar 93 Taxman.com 294(SC), the court in the context of section158BB has upheld the use of information collected in a survey in case of connected person carried along with search in other person for the purpose of making assessment u/s158BB. Provisions of 158BB are Pari Materia to section153A. The Delhi High court in PCIT Vs Kabul Chawla in para37(iv)observed as under: "iv. Although Section 153A does not say that additions should be st....
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...., relief etc in any earlier order shall also have no binding force in any subsequent proceedings and the change of opinion would be permissible. The Courts have accepted the principle that any fraud practice is always a ground for vacating the judgment, as where the court is deceived or misled as to material circumstances, or its process is abused, resulting in the rendition of a judgment, which would not have been given if the whole conduct of the case had been fair". The Madras High Court in case of L. Mohanamvs Mohamed Idris on 24 June,2011 in O.S.A.No.310 of 2010 has observed as under: 19. In support of his contention, the learned senior counsel for the appellant /plaintiff relied on the decision of the Hon'ble Supreme Court in Hamza Haji V. State of Kerala and another reported in (2006) 7S CC 416, wherein it has been observed that a decision obtained by playing a fraud on Court is liable to be setaside on the basic principle that the party who secured such a decision by fraud cannot be allowed to enjoy its fruits. The learned senior counsel also relied on the observation of the Hon'ble Supreme Court in State of Andhra Pradesh and another Vs. T.Suryach....
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.... of opinion, Court ought to verify whether assessment earlier made has either expressly or by necessary implication expressed an opinion no matter which is basis of alleged escapement of income that was taxable; if assessment order is non-speaking, cryptic or perfunctory in nature, it may be difficult to attribute to Assessing Officer any opinion on questions that are raised in proposed re-assessment proceedings- Held, yes -Whether every attempt to bring to tax income that has escaped assessment, cannot be absorbed by judicial intervention on an assumed change of opinion even in cases where order of assessment does not address itself to a given aspect sought to be examined in re-assessment proceedings- Held, yes In view of the above, applying the same principle in the present context also, it can be safely concluded that in the absence of any categorical finding on the genuineness of a claim in an earlier assessment having being accepted on make belief documents/ evidences only, it cannot be said that the A.O. has expressed any opinion on the correctness or otherwise of the items/ entries disclosed in the return of income already filed prior to the search....
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....see has failed to prove that the share transactions are genuine and could not furnish evidences regarding the sale of shares except the copies of the contract notes, cheques received against the overwhelming evidences collected by the Revenue regarding the operation of the entire affairs of the assessee. This cannot be a case of intelligent investment or a simple and straight case of tax planning to gain benefit of long-term capital gains. The earnings @ 491% over a period of 5 months is beyond human probability and defies business logic of any business enterprise dealing with share transactions. The net worth of the company is not known to the assessee. Even the brokers who coordinated the transactions were also unknown to the assessee. All these facts give credence to the unreliability of the entire transaction of shares giving rise to such capital gains. The ratio laid down by the Hon'ble Supreme Court in the case of SumatiDayal vs. CIT, 214 ITR 801 is squarely applicable to the case. Though the assessee has received the amounts by way of account payee cheques, the transactions cannot be treated as genume in the presence of the overwhelming evidences put forward by the Reven....
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....;ble High Court has also dealt with the arguments of the assessee that he was denied the right of cross examination of the individuals whose statements led to the enquiry. The ld. AR argument that no question of law has been framed in the case of Udit Kalra also does not make any tangible difference to the decision of this case. Since the additions have been confirmed based on the enquiries by the Revenue, taking into consideration ratio laid down by the various High Courts and Hon'ble Supreme Court, our decision is equally applicable to the receipts obtained from all the three entities. Further, reliance is also placed on the orders of various Courts and Tribunals listed below. • MK. Rajeshwari vs. ITO in ITA No.17231Bangl2018, order dated 12.10.2018. • Abhimanyu Soin vs. ACIT in ITA No. 9511Chdl2016, order dated 18.04.2018. • Sanjay Bimalchand Jain vs. ITO 89 taxmann.com 196. • Dinesh Kumar Khandelwal, HUF vs. ITO in ITA No. 58 & 591Nagl2015, order dated 24.08.2016. • Ratnakar M Pujari vs. ITO in IT A No. 9951Muml2012, order dated 03.08.2016. • Disha N. Lalwani vs. ITO in ITA No. 6398 I Mum I 2012, ....
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....ent was recorded under duress and coercion, SLP filed against of High Court was to be dismissed. In the present group cases admission made by assessee's under 132(4) of the Act are squarely covered with the judgement. 6. In the appellant cases the penny stock script for accommodation entry traded was "SPLASH MEDIA" MIDLAND POLYMERS LIMITED, SULABH ENGINEERING, FIRST FINANCIAL SERVICES LIMITED, EINS EDUTEC LIMITED FACT ENTERPRISE for LTCG is the main script which has been identified as penny stock by the Investigation Report prepared by Directorate of Investigation, Kolkata dated 27.4.2015. In the recent judgement of Kolkata High Court in the case of PCIT vs. Swati Bajaj & others, Hon'ble High Court has accepted the Investigation report and based on which the bogus LTCG claimed by various persons have been rejected and judgement made in favour of Revenue. In appeals of the Mevrick group cases main penny stock where accommodation entries were through brokers obtained was "Splash Media". These assessees have claimed bogus LTCG in the same script where Kolkata High Court has treated the script as penny stock on the basis of Investigation report. During search assessee....
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....s submitted before the Hon'ble Court that the Tribunal erred in holding that the information and statements recorded by Investigation Wing could not be taken into consideration while making assessment as such material was not disclosed nor an opportunity was accorded for cross-examination of the assessee. It was submitted before the Hon'ble Court that Tribunal did not examine the case on touchstone of human probability. However, Hon'ble High Court upheld the order of the Tribunal. It was considered that prejudice was caused to the assessee as he should have been allowed an opportunity of being heard and of rebutting the evidences against him. It was also impliedly held that direct evidences weigh more than circumstantial evidences and human probabilities. The relevant extract of order is as under: "..The Tribunal by impugned order has categorically held that the material information received by the Assessing Officer from the investigation wing alongwith certain statements recorded by DBIT Investigation, Calcutta could not be taken into consideration as that material was not disclosed nor an opportunity was accorded for cross-examination of the Assessee. This finding record....
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....have found that at the time of transactions, the broker in question was not banned by SEBI at the time of transaction and that assessee had produced copies of purchase bills, contract number share certificate, application for transfer of share certificate to demat account along with copies of holding statement in demat account, balance sheet as on 31st March, 2003, sale bill, bank account, demat account and official report and quotations of Calcutta Stock Exchange Association Ltd. on 23rd July, 2003. In our view, present appeal does not raise any question of law, much less any substantial question of law..." 5. Hon'ble Calcutta High Court has mainly decided the case against the assessees for the reason that factual position in any of the 89 appeals forming part of the bunch was not discussed by the Hon'ble ITAT (para 40, Page 80). In the instant case it is submitted that assessee's case was not part of any bunch of cases and, therefore, there cannot be any situation that facts were not properly discussed and appreciated by the appellate authority. 6. Hon'ble Calcutta High Court has not held that the report of Investigation Wing can be conclusive for making additio....
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....he assessee nor cross examination was allowed by the learned A.O. Therefore, in our considered opinion, assessee has discharged his onus and no addition can be sustained in the hands of the assessee." 7.2 CIT vs Odeon Builders (P.) Ltd [2019] 110 taxmann.com 64 (SC) Hon'ble Supreme Court held that if the addition was based on third party information gathered by Investigation wing then addition cannot be made unless such information is provided to the assessee and opportunity of cross examination is provided moreso when assessee placed on record all the evidences. The relevant findings are as under: Headnote: Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of (Bogus purchase) - Certain portion of purchases made by assessee was disallowed - Commissioner (Appeals) found that entire disallowance was based on third party information gathered by Investigation Wing of Department, which had not been independently subjected to further verification by Assessing Officer and he had not provided copy of such statements to appellant, thus, denying opportunity of cross examination to appellant, who on other hand, had prima facie discharged initial....
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....evi [2022] 138 taxmann.com 150 (SC) wherein SLP filed against the decision of Hon'ble Delhi High Court in the case of PCIT vs Krishna Devi [2021] 126 taxmann.com 80 (Delhi) was dismissed. Hon'ble Delhi High Court categorically noted that the Court has to decide the issue on the basis of evidence and proof and not suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the assessee. If the revenue has failed to bring evidence on record that money changed hands and there was agreement to convert unaccounted money mere reliance on the report of investigation without further corroboration does not justify the conclusion that the assessee obtained an accommodation entry. Relevant extract is as under: "11. .........The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income-tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of co....
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....he additions cannot be sustained. 12. Mr. Hossain's submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. With regard to the claim that observations made by the CIT(A) were in conflict with the Impugned Order, we may only note that the said observations are general in nature and later in the order, the CIT(A) itself notes that the broker did not respond to the notices. Be that as it may, the CIT(A) has only approved the order of the AO, following the same reasoning, and relying upon the report of the Investigation Wing. Lastly, reliance placed by the Revenue on Suman Poddar case (supra) and Sumati Dayal case (supra) is of no assistance. Upon examining the judgment of Suman Poddar case (supra) at length, we find that the decision therein was arrived at in light of the peculiar facts and circumstances demonstrated before the ....
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....ing the appeal on technical ground asking the AO confirm whether any incriminating material found or not? Even he has not mentioned the fact that the report of the Investigation Wing of Kolkatta is available before him or not. The ld. AO vide letter dated 10.08.2018 confirmed the fact that there is no incriminating material and the ld. CIT(A) has after recording the detailed findings and following binding decisions allowed the appeal of the assessee on the issue of LTCG claimed by the assessee as exempt. The ld. AR of the assessee submitted that based on the retraction affidavit the confession u/s. 132(4) cannot be binding since the same was under pressure. The ld. AR of the assessee submitted that the surrender made in the statement recorded u/s. 132(4) was not voluntary and it was under tremendous pressure. The search was carried out at the early morning when the assessee intends to start the business 8.45 AM the officers did not allow to do the business where he is associated. The assessee and its group company has suffered huge financial loss and reputation loss and even the SEBI has taken action against for such failure. 17. We have considered the rival contentions, perused....
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....make any addition in the total income of the assessee. It is a settled position of law that there cannot be a review under the garb of reassessment proceeding under section 153A of the Act. Therefore, the proposed reassessment proceedings are absolutely in abuse of process of law, illegal and bad in law. The provisions of section 153A cannot be applied in respect of assessment which has already been completed unless some incriminating material/information comes into the possession/knowledge of the AO during the course of search proceedings. Since the assessment for the assessment year 201112 was not pending as on the date of search and there is no incriminating material found or seized during the course of search, then the AO is bound to reassess the total income as it was assessed on the original return of income. Though the AO is legally bound to assess or reassess the total income of six years immediately preceding to the year of search, however, the assessments which are pending on the date of search gets abated and the assessments which were not pending on the date of search had attained the finality. Therefore, the addition over and above the assessed income cannot be made de....
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....eir contentions: * Shares were purchased online through recognized stock exchange in all the cases; * Payment of purchases consideration towards shares purchased was made through banking channel; * Shares were got dematerialized soon after they got purchased; * Shares were sold online through recognized stock exchange; * Sale consideration was received through banking channels. 19. The ld. AR of the assessee demonstrated before us that the assessee engaged in share trading on regular basis and the transactions in respect of which exemption u/s 10(38) is denied/Short term capital loss is added back were not the solitary transactions in shares. At this juncture, total LTCG/STCL earned by them, disallowance made and total portfolio as on the last date of balance sheet is tabulated in Annexure and filed in the paper book. We have persuaded those contentions raised. From the perusal of the chart annexed, it is evident that the assessees have been regularly dealing in shares and hold shares of various companies other than the company alleged as penny stock companies also. 20. The ld. AR of the assessee also argued before us that apart fr....
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....basis of the principle propounded by the Supreme Court in the case of Sumati Dayal (supra), does not apply to the facts of the present case at all. The Tribunal's findings are based on material placed on record. The aspect of human probability, in the present case, only goes against the Revenue because in the present case, a raid was conducted and in that process, statement is said to have been recorded under Section 132(4) of the I.T. Act, which was, later on, retracted by the Assessee. In a situation like this, where the office premises are sealed for many days and during that period, a statement is said to have been recorded under Section 132 (4) of the I.T. Act, the Tribunal's view that only the basis of such retracted statement, addition could not be justified without any other material admissible in evidence, warrants no interference as it is not a substantial question of law. In the case of Commissioner of Income Tax Versus Harjeev Aggarwal reported in (2016) 290 CTR (Del) 263 and Kailashben Manharlal Chokshi Versus Commissioner of Income Tax reported in (2010) 328 ITR 411 (Guj) various High Courts have held that addition based solely on statement later on retracted....
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....h 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. I 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 postsearch 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 assess....
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....iminating material whatsoever found during the search to justify initiation of proceedings under Section 153A of the Act. 2. The Court finds that the order of the CIT(Appeals) reveals that there is a factual finding that "no incriminating evidence related to share capital issued was found during the course of search as is manifest from the order of the AO." Consequently, it was held that the AO was not justified in invoking Section 68 of the Act for the purposes of making additions on account of share capital. 3. As far as the above facts are concerned, there is nothing shown to the court to persuade and hold that the above factual determination is perverse. Consequently, after considering all the facts and circumstances of the case, the Court is of the opinion that no substantial question of law arises in the impugned order of the ITAT which requires examination." The SLP filed by the revenue against the said decision of Hon'ble Delhi High Court was dismissed by the Hon'ble Supreme Court vide order dated 7th December, 2015. In a subsequent decision, the Hon'ble Delhi High Court in the case of Principal CIT vs. Meeta Gutgutia has again analyzed this....
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....e evidence found. This, however, does not mean that the assessment under Section 153A 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." 58. In Kabul Chawla (supra), the Court discussed the decision in Filatex India Ltd. (supra) as well as the above two decisions and observed as under: "31. What distinguishes the decisions both in CITV. Chetan Das Lachman Das (supra), and Filatex India Ltd. v. CIT-IV (supra) in their application to the present case is that in both the said cases there was some material unearthed during the search, whereas in the present case there admittedly was none. Secondly, it is plain from a careful reading of the said two. decisions that they do not hold that additions can be validly made to income forming the subject matter of completed assessments prior to the search even if no incriminating material whatsoever was unearthed during the search. 32. Recently by its order dated 6th July 2015 in ITA No. 369 of 2015 (Pr. Commissioner of Income Tax v. Kurele Paper Mills P. Ltd.), this Court declined to frame a ....
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....ave been found at more than one place in Section 153A of the Act as under: "26. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess'-have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word assess has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents,"' 60. In Kabul Chawla (supra), the Court also took note of the decision of the Bombay High Court in CITV. Continental Warehousing....
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....s 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 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." 61. It appears that a number of High Courts have concurred with the decision of this Court in Kabul Chawla (supra) beginning with the Gujarat High Court in Saumya Construction (P.) Ltd. (supra). There, a search and seizure operation was carried out on 7th October, 2009 and an assessment came to be framed under Section 143(3) read with Section 153A(1)(b) in determining the total income of the Assessee of Rs. 14.5 crores against declared income of Rs. 3.44 crores. The ITAT del....
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....o would stand revived. The proviso thereto says that such revival shall cease to have effect if such order of annulment is set aside. Thus, any proceeding of assessment or reassessment falling within the six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A of the Act. Similarly, sub-section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of the Act is annulled in appeal or any other proceeding. 16. Section 153A bears the heading "Assessment in case of search or requisition". It is "well settled as held by the Supreme Court in a catena of decisions that the heading or the Section Can be regarded as a key to the interpretation of the operative portion of the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of section 153. the intention of the Legislature is clear, viz., to provide for assessment in case of search and requisition. When the very purpos....
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....ition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated. In this regard, this court is in complete agreement with the view adopted by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra). Besides, as rightly pointed out by the learned counsel for the respondent, the controversy involved in the present case stands concluded by the decision of this court In the case of CITV. Jayaben Ratilal Sorathia (supra) wherein it has been held that while it cannot be disputed that considering section 153A of the Act, the Assessing Officer can reopen and/or assess the return with respect to six preceding years; however, there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year.' 62. Subsequently, in Devangi alias Rupa (supra), another Bench of the Gujarat High Court reiterated the above legal position following its earlier decision in Saumya Construction (P.) Ltd. (supra) and of this Court in Kabul Chawla supra). As far as Karnataka High Court is c....
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....actors like inability of accountant, our busy schedule and some family problems, various purchases and sales of Supari, Gutka and other items dealt by our firms is not entered and shown in the regular books of accounts maintained by our firms." 65. Therefore, there was a clear admission by the Assessees in Smt. Dayawanti Gupta (supra) there that they were not maintaining regular books of accounts and the transactions were not recorded therein. 66. Further, in answer to Question No. 11, the Assessee in Smt. Dayawanti Gupta (supra) was confronted with certain documents seized during the search. The answer was categorical and reads thus: "Ans:- I hereby admit that these papers also contend details of various transactions include purchase/sales/manufacturing trading of Gutkha, Supari made in cash outside Books of accounts and these are actually unaccounted transactions made by our two firms namely M/s. Asom Trading and M/s. Balaji Perfumes." 67. By contrast, there is no such statement in the present case which can be said to constitute an admission by the Assessee of a failure to record any transaction in the accounts of the Assessee for the AYS in q....
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....ecision was the "habitual concealing of income and indulging in clandestine operations" and that a person indulging in such activities "can hardly be accepted to maintain meticulous books or records for long." These factors are absent in the present case. There was no justification at all for the AO to proceed on surmises and estimates without there being any incriminating material qua the AY for which he sought to make additions of franchisee commission. 70. The above distinguishing factors in Smt. Dayawanti Gupta (supra), therefore, do not detract from the settled legal position in Kabul Chawla (supra) which has been followed not only by this Court in its subsequent decisions but also by several other High Courts. 71. For all of the aforementioned reasons, the Court is of the view that the ITAT was justified in holding that the invocation of Section 153A by the Revenue for the AYS 2000-01 to 2003-04 was without any legal basis as there was no incriminating material qua each of those AYS." 24. The Hon'ble Delhi High Court has concurred with the view as taken in case of Kabul Chawla (supra) as well as the decision of Hon'ble Jurisdictional High Court in....
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....utgutia was dismissed vide order dated 2nd July, 2018. There are series of decisions on this issue including the decision of Hon'ble Jurisdictional High Court in case of M/s. Jal Steel India vs. ACIT (supra) wherein the Hon'ble High Court has held in para 23 to 30 as under : "23. The reliance placed by the counsel for the appellant on the case of Anil Kumar Bhatia (supra) also does not help the case of the assessee. The relevant extract of the said judgment reads as under: "19. Under the provisions of Section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature this Section is that the Assessing Officer is empowered to assess or reassess the "total income" of the aforesaid years. This is significant departure from the earlier block assessment scheme in which the block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multip....
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....re is no room for multiple assessment orders in respect of any of the six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the 'total income' of the assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining the total income of the assessee. In order to ensure this state of affairs namely, that in respect of the six assessment years preceding the assessment year relevant to the year in which the search took place there is only one determination of the total income, it has been provided in the second proviso of sub-Section (1) of Section 153A that any proceedings for assessment or reassessment of the assessee which are pending on the date of initiation of the search or making requisition "shall abate". Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of hose six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the ....
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.... found during the course of search, the notice and consequential assessment under Section 153A have to be undertaken. 25. The argument of the learned counsel that the AO is also free to disturb income, expenditure or deduction de hors the incriminating. material, while making assessment under Section 153A of the Act is also not borne out from the scheme of the said provision which as noticed above is essentially in context of search and/or requisition. The provisions of Sections 153A to 153C cannot be interpreted to be a further innings for the AO and/or assessee beyond provisions of Sections 139 (return of income), 139(5) (revised return of income), 147 (income escaping assessment) and 263 (revision of orders) of the Act. 26. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess' have been used at more than one place in the Section and a harmonious construction of the entire....
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....hief may be avoided." 29. The argument of the counsel for the appellant if taken to its logical end would mean that even in cases where the appeal arising out of the completed assessment has been decided by the CIT(A), ITAT and the High Court, on a notice issued under Section 153A of the Act, the AO would have power to undo what has been concluded up to the High Court. Any interpretation which leads to such conclusion has to be repelled and/or avoided as held by the Hon'ble Supreme Court in the case of K.P. Varghese (supra). 30. Consequently, it is held that it is not open for the assessee to seek deduction or claim expenditure which has not been claimed in the original assessment, which assessment already stands completed, only because a assessment under Section 153A of the Act in pursuance of search or requisition is required to be made." 26. As it is evidently clear that not only in the assessment order there is no mention, reference or finding that the additions have been made by the AO on the basis of any incriminating material found during the course of search and seizure in the case of the assessee but in the remand proceeding the ld. CIT(A) has spec....
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....er completed u/s 143(3)/147 or the cases where no return was filed prior to search. Thus, in all the three categories, it is as per the scheme of the Act that the total income of the assessee as defined u/s 2(45) needs to be assessed for all the 6 AYs for which the AO is mandated to issue notice u/s153A. However, to support of the said view the ld. AO did not bring any binding decision of the view that he advanced before us. The ld. DR has also relied upon the judgments which cited in his written submissions are also considered by us but at the same time are not applicable to the facts and circumstances of the present case. The ld. DR has cited the recent judgment in the favour of revenue in the case of Swati Bajaj wherein the Calcutta High Court has confirmed the addition of LTCG. Against this we have considered the detailed note of the ld. AR of the assessee who has distinguished the fact of that case also. The ld. DR has admitted that there are divergence of judicial opinion on the question of whether assessment u/s. 153A can be restricted to only the incriminating material seized during the search or whether the AO can also take a view based on something which might be noticed ....
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....lace their case and in that case the ld. AO has categorically submitted that in this case there is no incriminating material found. The ld. DR appearing on the behalf of the revenue has merely relied on the investigation done by the Investigation Wing in the case of various searched conducted by the department and the statement of the various persons recorded at the time. The ld. AO heavily relied upon on the statement of Shri Anil Agarwal who he has retracted from his statement and even the statement recorded in this case of the assessee was also retracted. In all these processes we have not seen any reasons as to why and how the order of the ld. CIT(A) is not correct. As the ld. CIT(A) has after considering the detailed arguments of both the parties clearly taken a view that there is no incrementing material, no addition can be made for the assessment years which are already completed after making the proper enquiries by the AO, and those assessment cannot be allowed to again reframed merely based on the search and that too without any fresh evidence or any fresh material unearthed during search no fresh addition can be made on the issue which are already settled. Even, the ld. C....
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....as well. The said Para 19 of the order is reproduced below :- "19. We, thus, find that the ITAT rightly permitted this additional ground to be raised and correctly dealt with the same ground on merits as well. Order of the High Court affirming this view of the Tribunal is, therefore, without any blemish. Before us, it was argued by the respondent that notice in respect of the Assessment Years 2000-01 and 2001-02 was time barred. However, in view of our aforementioned findings, it is not necessary to enter into this controversy." As regards the second question, the Hon'ble Supreme Court held, inter alia, that the existence of incriminating material for interfering with completed assessments on the date of search was a jurisdictional fact failing which, no assessment was possible for those years u/s 153C of the Act. It was further affirmed that the incriminating material had to pertain to the four assessment years in question i.e. A.Ys 2000-01 to 2003-04 and since the finding of the facts at para-9 of the order of ITAT revealed that the material as per the satisfaction note belonged to A.Y. 2004-05 or thereafter which were not the four assessment years in question, no....
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....f section 153C have been complied with, the assessment u/s 153C shall be made in accordance with the provisions of section 153A of the Act. For ease of reference, the relevant provisions of sections 153C and 153A are reproduced as under:- Assessment of income of any other person. "153C (1)Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion,jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A :]......" Assessment in case of search or requisition. "153A. Notwithstanding anything contained in section 139, section 147, section 148....
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....on shall have to take place in accordance with section 153A of the Act. Assessment of concluded/ not pending assessment on the date of search to be based on incriminating material. Section 153A of the Act was the subject matter of interpretation by the Hon'ble Delhi High Court in the case of Kabul Chawla (supra) and several other High Courts across the country which uniformly held that the existence of incriminating material, in respect of the assessment years whose assessments stood concluded on the date of search, is a mandatory requirement to assess or reassess those years. Some of the other judgments are cited as under : i. Pr. CIT v. Vikas Telecom Ltd. [2022] 135 taxmann.com 362/286 Taxman 238 (Delhi HC) ii. Pr. CIT v. Allied Perfumers (P.) Ltd. [2021] 124 taxmann.com 358/279 Taxman 185/431 ITR 237 (Delhi HC) iii. CIT v. RRJ Securities Ltd. [2015] 62 taxmann.com 391/[2016] 380 ITR 612 (Delhi HC) iv. Pr. CIT v. v. Meeta Gutgutia [2017] 82 taxmann.com 287/248 Taxman 384/395 ITR 526 (Delhi HC) v. CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78/232 Taxman 270/374 ITR 645 (Bombay HC) vi....
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....order of the CIT(A) which the revenue did not challenge before us and it is not ground before us. In the case of the apex court decision in the case of Sinhgad (Supra) approved para 9 and para 10 of the co ordinate bench of ITAT order which specifically talks of section 153A. It may further be seen that the Hon'ble Supreme Court at para-18 of their order, relied upon and affirmed the paras 9 and 10 of the order of the Hon'ble ITAT. It is trite law that when the Hon'ble Supreme Court decides an issue, the orders of the authorities below merge with the order of the Supreme Court as has been held in the following judgments : i. V.M Salgaocar & Bros (P) Ltd v. CIT (2000) 110 Taxman 67/243 ITR 383 (SC) ii. Smt. Tej Kumari v. CIT (2001) 114 Taxman 404/247 ITR 210 (Patna) (FB) iii. A.V. Papayya Sastry v. Government Of A.P. (2007) 4 SCC 211 iv. CIT v. Tejaji Farasram [1953] 23 ITR 412/AIR 1954 Bom 93(Bombay HC) v. CIT v. Amritlal Bhogila & Co [1958] 34 ITR 130/1958 AIR 868, 713(SC) vi. Shankar Ramchandra Abhyankar v. Krishnaji Dattatreya Bapat AIR 1970 SC 1 (SC) vii. Kunhayammed v. State Of Kerala [2000] 113 Taxman ....
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....d some information against the Mr. Navale HUF, which is not relevant for the present assessee. In the process, the AO totally missed the requirements of the law i.e. only the assessment year with the pending assessments and the assessment year with the assessment year specific incriminating documents/transactions or seized asset should only be reopened under the provisions of the first proviso to s. 153A of the Act and not otherwise. 10. In this regard, we have perused various legal propositions. First, we have perused the decision of this Tribunal in the case of Kumar & Co. case (supra) and para 26 of Kumar & Co's. case (supra) for the asst. yr. 2000-01 and the same reads as follows : "25. Thus, we find that the seized documents belong to the assessee by way of limited ownership and they are not dumb documents as advocated by the learned counsel for the reason mentioned above. However, they are not found to be incriminating documents for the asst. yr. 2000-01. The document may not be a dumb document and therefore a speaking one, but they must be the document with prima facie incriminating information too. Such incriminating nature of the seized document is an....
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.... under section 153C, after being examined very closely, did not reveal any assessment year specific incriminating information or other information i.e. unaccounted or undisclosed income or hidden information to the Revenue in respect of the four assessment years. It may be seen that theco ordinate bench of ITAT explicitly stated that only assessments that are pending on the date of search and those assessment years where specific incriminating documents/transactions or asset seized exist, can be re-opened under the first proviso to section 153A of the Act and not otherwise. Being consistent with the finding of clearly holding that for the purpose of making the assessment of concluded assessments u/s 153C of the Act, the requirement of the existence of incriminating material is a sine qua non. 34. The Hon'ble Supreme Court while deciding the issue arising in section 153C of the Act have applied their mind by referring to and approving the specific portion dealing with section 153A of the Act by the Hon'ble ITAT and have explicitly held that the assessment or reassessment which has to be made in accordance with the provisions u/s 153A of the Act once the satisfaction note ....
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....l 2021. For the searches conducted u/s 132(1) of the Act on or after 1st April 2021, the assessments shall now be framed under section 147 read with section 148, 148A, 149,151 of the Income-tax Act, 1961 as substituted by the Finance Act, 2021. Under the new legal framework of search assessments u/s 147 of the Act, the assessments beyond 3 years can be reopened only when the Assessing Officer has in his possession books of accounts or other documents or evidence which reveal that the income chargeable to tax, represented in the form of an asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year. Hence, the Legislature in their wisdom has now agreed with the various earlier decisions starting with Kabul Chawla (supra) and have introduced new provisions to actually mean that for assessing or re-assessing any year beyond 3 years, consequent to search on or after 1st April, 2021, the requirement of incriminating material is mandatory. Hence, in view of the said amendment applicable to search on or after 1st April, 2021, this support the view that the intention of the Legislature even in the past was that concluded assessments shou....
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....handelwal, who is one of the employee of the Marvick Group. The PEN drive so seized contained some files in excel format/software. The excel sheet contains adjustment entries in the last column with remarks 2.4 %. The adjustment entries pertaining to the assessee works out for Rs. 2,86,948/- for the year under consideration. Based on this fact a show cause notice was issued to the assessee asking so as to why the same amount should not be added to total income as interest paid from undisclosed sources. The assessee replied that the amount represents the additional interest asked by the finance broker which was not paid by the assessee. Finding not favour with the reply of the assessee the ld. AO added the said sum as interest paid from undisclosed sources. The assessee has disputed the said addition before the ld. CIT(A) and submitted the fact that the additional interest which is in dispute were not paid and whatever interest paid is duly accounted in the books. But ld. CIT(A) confirmed the addition and aggrieved assessee has challenged the said addition before us. 40.2 On this issue the explanation rendered by the assessee before the lower authority is briefly narrated here in....
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....ident from the fact that assessee has deducted due tax on the amount of interest actually paid by him and the same is appearing as such in the excel sheets. The entries appearing in the 'adjustment' column was the additional interest asked by the lender, which was never paid by the assessee, as is evident from the fact that no TDS was deducted thereon nor any payment was made. Further no incriminating document was found during the course of search corroborating the allegation of ld. AO nor was anything brought on record by making independent enquiry during the post search or assessment proceedings to support the allegation that assessee had paid anything more than what was recorded in the books of the assessee. It is also a matter of fact that during the course of assessment proceedings, assessee had filed copies of confirmation from the concerned parties along with the PAN and complete address, duly confirming the amount borrowed with the amount of Interest paid and Tax deducted by the assessee which stood accepted by ld.AO without raising any doubts. Thus the assessee has duly discharged the burden of explaining the entries in the pen-drive found in possession of an employee of t....
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....the books of accounts. The ld. AR of the assessee submitted that it is respective parties who were demanding, further interest @ 2.4% in addition to what has been recorded in the books. The additional interest which the assessee or its group concern never paid and there is no evidence of any such further sums paid and found as paid in the course of search. Since the issue is revolving about the PEN Drive found, the bench asked both the parties whether any finding of any person recorded and/or the statement of the person under whose possession this PEN drive found is recorded or not? In response it has been confirmed that there is no finding about the veracity of this PEN drive in the orders of the lower authorities. Therefore, working recorded in this PEN drive is merely an information recorded by that person and whatever financial transaction related to that information is recorded in the books and are already explained before the lower authorities and there is not dispute on this aspect. The revenue has made this addition in the hands of the assessee as protective addition only based on working made in this PEN drive. Therefore, the bench has directed revenue to call the factual ....
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....e's group persons amounting to Rs. 69,499/- in the A.Y. 2010-11. Rs. 85,361/- in the A.Y. 2011-12 Re 27,912- in the A.Y. 2012-13 and Rs. 37,32,344 in the A.Y. 2013-14 were added to the total income of the assessee on protective basis. However, nothing on assessment record has been found which provide the details of the persons in which the substantive addition were made. iii. During the course of appellate proceedings, the assessee has contended that the pen drive found from the premises of one of the employee, Sh. Kailash Chand Khandelwal does not relates to the appellant in particular or the persons of the assessee group. However, the Ld. CIT(A) rejected the contention of the assessee and stated that the pen drive found from the premises of Sh. Kailash Chand Khandelwal belongs to the assessee group and some of the appellant specifically mentioned in column No. 2 of spread sheet. The seized material is lying with the office of ACIT, Central Circle-4, Jaipur. If any further clarification is needed on this issue, the same may be obtained from that office. Case records for A.Ys. 2010-11, 2011-12, 201-13 and 2013-14 (One volume each) are enclosed herewith." 40....
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....same is also confirmed by the AO in the report presented before us. 16. It is not disputed the findings of the ld. AO that there is no addition on substantive basis. Thus, the protective addition cannot be survived as AR of the assessee explicitly proved that whatever interest that they have paid in the group cases is duly recorded in the books of accounts and wherever applicable TDS is also deducted. As an additional interest as allegedly demanded by the parties is not paid by the assessee, even those parties are not questioned on that 2.4% found recorded in the Excel-Sheet and same were also not taxed on substantive basis. There cannot be any protective addition without making the substantive addition and Revenue did not controvert the argument of the AR of the assessee and has also not supported by any judicial decision so as to confirm the order of the lower authorities. Thus, the interest which is actually paid is duly recorded in the books of accounts and there is no other material which is found even the person under whom possession the PAN Drive is found his statement is not recorded. This action itself shows that department find this evidence as dump documents and....