TaxTMI 
TaxTMI 
2024 (4) TMI 262
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....y of 16 days in the appeals filed by the assessee, the condonation of which has been sought by Ld. AR appearing for the assessee. The Ld. CIT-DR opposed the condonation of delay. However, considering the period of delay, the bench deems it fit to condone the delay and proceed for adjudication of the appeals on merits. 3.1 The grounds taken by the Revenue in AY 2015-16 read as under: 1. The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law. 2.1 The Ld. CIT(A) erred in deleting the addition of Rs. 12,00,00,000/- made towards payment received from M/s S.R.S. Mining and associates based on the incriminating material seized from the premises of SRS Mining. 2.2 The Ld. CIT(A) erred in accepting the explanation of the assessee that there is no mention anywhere in the statement of Shri Srinivasulu that the assessee was recipient of payments shown against the abbreviated names, without considering the fact that the assessing officer has clearly mentioned in the Para 3.2 of the order that Shri Srinivasulu admitted in his sworn statement dated 10.12.2013 that those note books were maintained by him as per the i....
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.... 3. For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the order of learned CIT(Appeals) may be set aside and that of the Assessing Officer be restored. 3.2 The assessee has revised / amended the original grounds of appeal. The revised / amended grounds read as under: - On the facts and in the circumstances of the case the learned CIT(A) erred in upholding the assumption of jurisdiction by the learned AO under section 153C and therefore not quashing the assessment order passed by him under section 143(3) read with section 153C when the learned AO had failed to record the necessary and valid satisfaction mandated under section 153C. As is evident, the sole issue that arises for our consideration is additions made by revenue based on search findings. The assessee is challenging the jurisdiction of Ld. AO on various legal grounds besides supporting impugned order on merits. 3.3 The Ld. CIT-DR, drawing attention to various grounds of appeal, supported the additions made in the assessment order whereas Ld. AR while supporting the impugned order on merits, assailed the validity of....
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....corded by Assessing Officer of the assessee satisfying himself that the seized materials contained information that related to the assessee and the same would have bearing on the determination of total income of the assessee. Further, notice was issued u/s 153C which was based on satisfaction note of the searched party as well as the satisfaction note of AO of the assessee. Both the officers have recorded their satisfaction after analyzing the incriminating material seized by the department. Therefore, the claim that Ld. AO only copied the contents of the satisfaction drawn by AO of the searched person was incorrect. The conclusion drawn by both officers is based on the same material and hence the assessee is not correct in claiming that the AO of the assessee has failed to apply his independent thought and judgment before drawing such satisfaction. Further, it cannot be termed as borrowed satisfaction. The Ld. CIT-DR further submitted that the entries found in seized material were recorded and maintained by Shri. K. Srinivasulu on instructions of partners of M/s SRS Mining. Accordingly, Shri K. Srinivasulu is the correct person to explain the entries in seized material and hence, ....
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.... of M/s SRS mining. Pursuant to the same, a satisfaction note was received from DCIT, Central Circle-2(4), Chennai vide AC-CC2(4)/153C/2021-22 on 15-07-2021 wherein the firm M/s SRS mining was assessed since the seized material allegedly contained date wise notings of the amounts paid to various persons in public service. The name and designation of the public servants involved were confirmed by the partners / employees of M/s SRS mining in sworn statements recorded u/s 132(4) of the Act. Upon perusal of seized material which contained Oswal note book, certain entries were found relatable to the assessee, the then Highway Minister during the period 2014 to 2016. These entries have been tabulated in para 3.1 of the assessment order. 4.2 The Ld. AO noted that a sworn statement was recorded from Shri K. Srinivasulu, an associate of Shri Sekar Reddy on 10-12-2016 wherein in response to question no.3, he stated that entries in the three Oswal note books were maintained by him as per the instructions of partners Shri S. Ramachandran, Shri J. Sekar and Shri K. Rethinam. He submitted that the entries were incidental expenses paid to various persons. 4.3 Considering the same, a notice....
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.... India (394 ITR 220) is distinguishable in the case of the assesses, for the simple reason that the evidences found were not simple loose sheets or arbitrary notings. The entries found in the seized materials were in the torn of proper accounts, maintained systematically, on daily basis, with tick marks showing that the entries have been verified with some basic documents. The entries have been logically explained by the author of the entries, during the course or search. Hence, inferences are drawn not on the basis of surmises but on the basis of evidences and the explanations furnished. (iv) It is to be noted that Shri Srinivasulu is a close associate of Shri Sekar Reddy of M/s. SRS Mining and looking after his operations. The nature of seized materials are undisclosed account books containing monthly income-expenditure accounts. Considering the nature of the transactions and the nature of the personalities involved, maintenance of Formal, clear and unambiguous books of accounts cannot be expected in such transactions. for obvious reasons. Sworn statement given during the course of search only will give the correct picture, as the deponent is free to depose the actual fa....
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.... service for facilitating mining and transportation of sand in the state of Tamil Nadu. 2. Three small Oswal Note books seized from No. 47, 49 VBC Solitaire, 3rd floor, Bazullah road, T Nagar, Chennai-17 annexed as ANN/KGAR/MPKSSR/B&D/S-1 to 3 and two long size books seized from New No. 26, Old No. 14, Yogambal Street, T.Nagar, Chennai - 17 annexed as ANN/MPK/NS/B&D/S-19 & 20 contain date wise notings of the amounts paid to persons in public service. The name and designation of the public servants involved were confirmed by the partners/employees of M/s SRS Mining in their sworn Statements recorded from them u/s 132(4) of the lncome Tax Act, 1961. 3. The Table in Para 4 below lists the illegal payments made on various dates to the public servant who was me, Date Name of the Public Servant as mentioned in the seized material Amount Rs. 16.08.2016 HW 30000000 06.09.2016 HW 30000000 15.06.2016 HW 2000000 16.08.2016 HW 60000000 16.08.2016 HW 30000000 04.02.2016 HW(M) 20000000 23.03.2016 HW(M) 20000000 06.09.2016 HW 30000000 05.10.1016 HW 30000000 26.07.2016 HW(M) 7000000....
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....erved that AO extracted all the entries in the seized material containing date wise details of amounts paid to a person who has been referred to as "HW" or "HW(M)" therein. Shri K. Srinivasulu from whose possession the said material was found and seized stated that the seized material contained entries regarding incidental expenses paid to various persons. It was stated by Shri K. Srinivasulu that the persons referred to as "HW" in the seized material was Highway Minister. Having regard to the fact that the assessee was Highway Minister in Govt. of Tamilnadu during the relevant period when the payments were made as per the seized material, Ld. AO arrived at the inference in the satisfaction note that the assessee was in receipt of the payments as found noted in the seized material. The satisfaction required u/s 153C was in the nature of primafacie satisfaction only and there was no requirement that the satisfaction was to be based on conclusive establishment of the fact that the seized material had bearing on the determination of total income of the assessee. This proposition was analogous to the well settled position of law with regard to the reasons recorded for reopening of asse....
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.... payments from M/s. SRS Mining or its associates during the previous year relevant to AYs 2015-16 to 2017-18. Further, as explicitly stated by the AO at para 6 of the satisfaction note, AO had arrived at the satisfaction that the information contained in the seized material had a bearing on the determination of the total income of the assessee on his perusal of the seized material. Finally, it was held by Ld. CIT(A) that AO had recorded the satisfaction note after going through the seized material and after independently applying his mind with regard to the contents of the said material. Therefore, this legal ground was also rejected. 5.4 The assessee's further objection that there were parallel proceedings u/s 147 & 153C was also rejected on the ground that the notices u/s 148 were issued on 24-04-2021 for AYs 2016-17 & 2017-18 and on 28-06-2021 for AY 2015-16. The reassessment proceedings for AYs 2015-16 & 2016-17 abated on issuance of notice u/s 153C on 23- 07-2021. The reassessment proceedings for AY 2017-18 were dropped on 22-07-2021 i.e., prior to issuance of notice u/s 153C. The proceedings for AYs 2015-16 & 2016-17 shall abate as per first proviso to Sec.153C read with s....
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....umption u/s 292C was only with reference to the person searched and it could not be extended to another person i.e., the assessee. This presumption would not apply against the assessee. A non-speaking document, without any corroborative material / evidence or without a finding that such document had materialized into transactions giving rise to income of the assessee, was to be disregarded fully. Unless these persons making statements against the assessee were allowed to be examined by the assessee, no adverse conclusion could be drawn against the assessee. To support all these submissions, the assessee referred to various judicial decisions rendered under similar circumstances. 5.6 The assessee further submitted that in the seized material, nowhere the name of the assessee was specified. The same only carried the abbreviation "HW(M)" as having received payments. The only evidence that linked the assessee with the seized material was the statement made by Shri K. Srinivasulu which was later on retracted on the ground that the statement was obtained under pressure. The Ld. AO erred in attaching standalone evidentiary value to the said statement without their being any solid corro....
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.... made to a particular person in his own right or it was paid to him on behalf of another person. In the absence of such essential and critical information, it could not be inferred with a reasonable degree of certainty that the payments were made to a person whose abbreviated names appeared therein and the said amount represents the income of the said persons. An entry made in the diary or notebook by a third-person with scant details could not be used to fasten the tax liability on the persons whose abbreviated name appears therein, in the absence of any corroborative evident. Such seized material was liable to be treated as dumb document which did not have any evidentiary value in respect of entries found therein in the absence of corroborative evidence which can provide necessary reliable basis for deciphering the nature and character of the said entries. To support the conclusion, Ld. CIT(A) referred to the decision of Jabalpur Bench of Tribunal in the case of ACIT vs Satyapal Wassan [TS-5104-ITAT-2007 (Jabalpur)-O] and also various other decisions which have been enumerated in paras 45 & 46 of the impugned order. Further, Mumbai Tribunal in the case of Riveria Properties Pvt. ....
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....fore, it was important that the corroborative evidence was available on record in support of the entries in the seized material found in the premises of third- party. 5.9 The Ld. CIT(A) also concurred that the statement of Shri K. Srinivasulu u/s 132(4) would not serve as corroborative evidence in respect of entries in the seized material. That person gave a general statement that the entries represent incidental expenses paid to various persons. When there were numerous pages and entries in the seized material, such a general statement would not inspire confidence for drawing any conclusion in respect of specific entries appearing therein allegedly with the abbreviated name of the assessee to conclude that the entries represent payment made to the assessee only. There was nothing in the statement even to remotely suggest that the entries appearing with the abbreviated name actually represent payment made to the assessee. The statement merely stated that the entries were maintained on the instructions of the partners of M/s SRS mining. It was very clear that Shri K. Srinivasulu had no first-hand knowledge of the payments noted in the seized material and had merely noted whatever....
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....018. The Hon'ble Court held that there was no infirmity in the order of AO in refusing the request for cross-examination since the witness turned hostile. The Hon'ble Court further observed that if AO was to rely on the statement of Shri K. Srinivasulu which is in favor of the revenue, the AO has to let in other reliable evidence to corroborate the same. Similarly, the Hon'ble Court in the case of M/s SRS mining Vs UOI (141 Taxmann.com 272), at para 9, observed that the statement of Shri K Srinivasulu could not be relied upon as he turned hostile by giving specific retraction statement and there was no need to accord permission to cross-examine him in view of the said reason. Considering these observations, it was to be held that the statement of Shri K. Srinivasulu could not be used against the assessee unless some other evidence to corroborate the same was made available on record. 5.11 In the present case, AO did not rely on any other corroborative evidences except for relying on the statement of Shri K. Srinivasulu since in the sworn statements of three other partners recorded on 08-12-2016, no questions were posed to them at all regarding the seized material allegedly conta....
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....come represented by the receipt of incidental charges from M/s SRS mining is not sustainable on facts. Hence, the AO is directed to delete the said addition for all the 3 assessment years. The relevant grounds of appeal are allowed. Aggrieved as aforesaid, the revenue is in further appeal before us. The assessee has also filed appeals for all the years assailing rejection of legal grounds by Ld. CIT(A). Our findings and Adjudication 6. From the detailed facts and discussions as enumerated by us in the preceding paragraphs, it emerges that the impugned additions have been made in the hands of the assessee pursuant to the search and seizure action by the department u/s 132 in group cases of M/s SRS mining and its partners on 08-12-2016. During the course of search action, certain incriminating material was found which was marked as ANN/MPK/NS/B&D/S-19 and 20 and ANN/KGRA/MPKSSR/B&D/S-1 to 3 from the premises of M/s SRS mining. During the course of search, a sworn statement was recorded u/s 132(4) from Shri K. Srinivasulu who acted as an employee of M/s SRS mining and who is stated to have made entries in the Oswal & other notebooks as found during the course of search. These....
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.... note and issued notice u/s 153C to the assessee. The assessee offered same return of income as originally returned u/s 139 and denied having undertaken any such transaction with the said group. The assessee also assailed jurisdiction u/s 153C on the ground that in the absence of any incriminating material, the notices issued u/s 153C would be bad-in-law. In such an eventuality, it was the burden of Ld. AO to prove his allegations. However, except for retracted statement of Shri K. Srinivasulu, there is no other material or evidence which would support the allegations of Ld. AO. 8. The Ld. AO continued to allege that payments were made to various persons including the assessee, the then Highway Minster (represented by the abbreviation HM). The Ld. AO also concluded that the denial by the assessee was not backed by any logic or evidence. In the present case, the entries were found recorded in a systematic manner and logically explained by the authors of the entries during the course of search. Considering this fact, it was to be concluded that the inference was not on the basis of surmises but on the basis of evidences and the explanations furnished during the course of search pr....
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....action have been placed on record. As rightly noted by Ld. CIT(A), one of the similarly placed assessee i.e., Shri P. Ramamohan Rao filed writ petition before Hon'ble High Court of Madras and sought cross-examination of Shri K. Srinivasulu vide WP No.34626 of 2018 and WMP No.40141 of 2018. An order was passed by Hon'ble Court in the same on 27-12-2018. Dismissing the petition, Hon'ble Court pertinently observed as under: - 4. The fact that the witness had turned hostile would only stand to the benefit of the petitioner as the entire evidence of the witness could be considered and this court is unable to understand as to how it would be adverse to that of the petitioner. Even if the respondent was to rely on that part of the evidence of Shri K. Srinivasulu which is in their favour they have to let in other reliable evidence to corroborate the same. During the course of the arguments, it was informed by the learned Senior Counsel that the copies of the evidence had not been provided to the petitioner and this court directs the respondents to give copies of the evidence to the petitioner. 5. I do not find any infirmity in the order of the respondent in refusing the r....
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....th the adjudication of Ld. CIT(A) that the additions were made merely on the basis of dumb document which would not possess any stand-alone evidentiary value since it did not contain the complete particulars of the relevant transactions and the persons involved in the said transactions. The seized material did not contain complete information to facilitate drawing of such an inference as done by Ld. AO. There was no mention as to the nature of said transaction of cash payment, the purpose of such payment and precise identity of the assessee. Further, there was no mention in the seized material as to whether the payment was made to a particular person in his own right or it was paid to him on behalf of another person. In the absence of such essential and critical information, it could not be inferred with a reasonable degree of certainty that the payments were made to a person whose abbreviated names appeared therein and the said amount represents the income of the said persons including the assessee. An entry made in the diary or notebook by a third-person with scant details could not be used to fasten the tax liability on the persons whose abbreviated name appears therein, in the ....
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....pra) the High Court inter alia reasoned as follows:- "14. Now there can be a situation when during the search conducted on one person under Section 132, some documents or valuable assets or books of account belonging to some other person, in whose case the search is not conducted, may be found. In such case, the Assessing Officer has to first be satisfied under Section 153C, which provides for the assessment of income of any other person, i.e., any other person who is not covered by the search, that the books of account or other valuable article or document belongs to the other person (person other than the one searched). He shall hand over the valuable article or books of account or document to the Assessing Officer having jurisdiction over the other person. Thereafter, the Assessing Officer having jurisdiction over the other person has to proceed against him and issue notice to that person in order to assess or reassess the income of such other person in the, manner contemplated by the provisions of Section 153A. Now a question may arise as to the applicability of the second proviso to Section 153A in the case of the other person, in order to examine the question of pend....
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....requirement in law. Such disastrous and harsh consequences cannot be attributed to Parliament. On the other hand, a plain reading of section 153-C supports the interpretation which this Court adopts. We proceed to adjudicate the assessee's sole ground of appeal. 16. In the present case, it is undisputed fact that the AO of the present assessee has received satisfaction note from DCIT, Central Circle-2(4), Chennai vide AC-CC2(4)/153C/2021-22 on 15-07-2021 where the firm M/s SRS mining was assessed. Applying the ratio of aforesaid decision of Hon'ble Court, the question of pendency and abatement of the proceedings of assessment or reassessment to the six assessment years will be examined with reference to such date i.e., 15-07-2021 which falls within Assessment Year 2022-23. As per relevant statutory provisions of Sec.153A, Ld. AO would have jurisdiction u/s 153C to assess or reassess the total income of the assessee for 6 Assessment Years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. In other words, Ld. AO would have jurisdiction to assess the income of the present assessee only from AY 2016-17....