TaxTMI 
TaxTMI 
2024 (4) TMI 976
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.... action and facts and issues involved are common, therefore, these appeals have been heard together and are being disposed of by this common order for the sake of convenience. The facts have been taken from assessee's appeal In IT(SS) No.58/Kol/2023. 3. The brief facts of the case are that a search and seizure operation was carried out u/s 132 of the Income Tax Act (in short the 'Act') on 08.08.2019 and on subsequent dates in the cases of the Badalia Group of Kolkata and its directors/associated persons. Apart from the business concern in which the assessee was a director, the assessee and his family members individually were also covered under the search operation. The present cases pertain to the search covering assessee's residential premises and consequent assessments carried out in the name of assessee in his individual capacity. 3.1 During the search action at the residential premises of the assessee, cash of Rs. 79.0 lakhs was found and jewellery of the value of Rs. 3.98 lakhs was also found. Out of which cash amount of Rs. 75,00,000/- was seized. However, jewellery was not seized. During the course of assessment proceedings, the assessee was asked to provide explanati....
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....me other persons and used to earn commission income from those creditors. He further stated regarding the entries of the loose sheets that there may be cases of duplication of entries and he has not gone through the exact figures and he would provide the exact figures within 14 days. Shri Ravi Badalia, however, voluntarily disclosed and surrendered a sum of Rs. 40 crores earned over the years by doing out of books sales in cash. 3.4 During the post search assessment proceedings carried out u/s 153A of the Act in the case of assessee Shri Ravi Badalia, he retracted from the disclosure of Rs. 40 cores and further stated that he along with his three sons was doing business of dealing in jewellery and ornaments and generated cash income which was further deployed to borrowers through Anil Kasera and Uma Shankar Kasera. It was stated that cash amounts were given to them from F.Y 2010-11 and upto 31.03.2016 totalling to Rs. 15 crores approximately. The assessee further stated that the assessee decided to avail the benefit under Income Declaration Scheme, 2016 announced by the Government of India and asked the Kaseras to get the amount refunded back from the parties to whom cash loans ....
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..... 99.64 crores treating the same as unexplained investment in the hand of the assessee under the provisions of section 69B of the Act. 4. Being aggrieved by the said order of the Assessing Officer, the assessee preferred appeal before the CIT(A). Before the ld. CIT(A), the assessee not only has taken the legal ground as to the validity of the impugned additions in an assessment carried out u/s 153A of the Act when no incriminating material was found during the course of search action, but also contested the impugned additions on merits. The assessee also submitted that the A.O. did not give him the proper opportunity to furnish the cash flow statement and other evidences. Assessee furnished the cash flow statement before the CIT(A) and also explained that there were duplication of entries as the figures were repeated in the said slips on account of reinvestment of the same amount and further that certain entries were in the name of some other persons and not the assessee, whereupon, the ld. CIT(A) called upon the remand report from the Assessing Officer. The assessee filed objections to the said remand report which were again sent to the Assessing Officer and second remand repor....
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....ed that in case of all the assessments having been completed for any assessment year, as on the date of search, any additions that are made, would have to be based upon incriminating material found during that search'. He held that since the assessment for the year under consideration was not completed in the case of the assessee on the date of search, therefore, the Assessing Officer was justified in taking into consideration the documents found during the course of search action in the case of third party i.e. Kaseria Group of cases. In respect of the objection of the assessee, that without gathering any corroborating evidence from the third party from where the impugned seized documents were found, these documents could not have been used against the assessee, the ld. CIT(A), though, in this respect held that there was a merit in the contention of the assessee and that while it was necessary to make corroborative enquires by the Assessing Officer in respect of impugned seized documents and regarding the contents of the statement given by the assessee, however, the lack of such enquiry would not vitiate the assessment in which these documents or statements have been used as ev....
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....sons, invalid and bad-in-law, to the extent to which they are prejudicial to the interests of the appellant. 2. For that the Ld. CIT (A) ought to have held that the assessment framed u/s 153A of the Act is bad-in-law and on facts. 3. For that the Ld. CIT (A) ought to have held that the authorized officer could not go beyond the seized papers u/s 132 in the case of an assessee for recording statement u/s 132(4) of the Act. 4. For that the Ld. CIT (A) erred in holding that the appellant was liable to explain the contents of the loose sheets shown to him though not seized u/s 132 from him and that income could be deduced with reference to those sheets. 5. For that the Ld. CIT (A) ought to have accepted the contention of the appellant that u/s 153A income of the appellant could not be determined on the basis of loose sheets which were not found in the course of search in the case of the appellant. 6. For that the authorized officer conducing the search in the case of the appellant exceeded his jurisdiction u/s 132 (4) by requiring the appellant to explain Xerox copies of sheets which were in possession of the revenue as a result of search u/....
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....5. For that the Ld. CIT (A) ought to have held that statement recorded u/s 132(4) can only be linked to respective search proceedings conducted u/s 132 wherein from the same emanates and not with regard to search& seizure having been conducted u/s 132 of the Act. 16. For that the Ld. CIT (A) ought to have held that in the absence of any incriminating evidence having been found out and seized by search party in course of search u/s 132 at the appellant's premises, no valid proceeding could have been initiated to assess any undisclosed income u/s 153A of the Act. 17. For that the Ld. CIT (A) erred in not holding that the search party exceeded its jurisdiction bestowed upon it u/s 132 to investigate the documents etc. alleged to have been found out and seized from a third party premises and to record the statement of the appellant u/s 132(4) in this regard. 18.For that the Ld. CIT A) erred in not holding that the search party could not have required the appellant to make a statement u/s 132(4) in respect of books of accounts and documents which have not been found to be in his possession or control and the authorized officer having done so vitiates the e....
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....ppellant who was subjected to search u/s 132 of the Act at Rs. 5,36,48,000/- which was worked out by the Ld. CIT (A) with reference to some loose sheets which were seized u/s 132 of the Act in the case of Kasera Group and Ors. 27. For that the Ld. CIT (A) erred in working out income of the appellant at Rs. 5,36,48,000/- by examining the seized papers w/s 132 of the Act from Kasera Group on 30.11.2018. 28. For that without prejudice to the legality of the assessment framed, the Ld. CIT (A) erred in determining the undisclosed income at Rs. 5,36,48,000/- on the alleged grounds. 29. For that without prejudice to the above the appellant contends that the amount of Rs. 1.44.48,000/- on the ground of interest element was totally unjustified as it is part of the credits which have been found out by the Ld. CIT (A) with reference to the remand reports. 30. For that the Ld. Addl. Commissioner of Income Tax erred in granting approval u/s 153D without properly appreciating the facts of the case and in a mechanical manner. 31. For that the Ld. Addl. CIT erred in not granting protection to the appellant against arbitrary and creating baseless tax lia....
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....icle or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property), then,- (A) the Principal Director General or Director General or Principal Director or Director or the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be, may authorise any Additional Director or Additional Commissioner or Joint Director, Joint Commissioner, Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer, or (B) such Additional Director or Additional Commissioner or Joint Director, or Joint Commissioner, as the case may be, may authorise any Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer, (the officer so authorised in all cases being hereinafter referred to as the authorised officer) to- (i) enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such books of ac....
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....ef Commissioner or Principal Commissioner or Commissioner having jurisdiction over such person may be prejudicial to the interests of the revenue : Provided further that where it is not possible or practicable to take physical possession of any valuable article or thing and remove it to a safe place due to its volume, weight or other physical characteristics or due to its being of a dangerous nature, the authorised officer may serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it, except with the previous permission of such authorised officer and such action of the authorised officer shall be deemed to be seizure of such valuable article or thing under clause (iii): Provided also that nothing contained in the second proviso shall apply in case of any valuable article or thing, being stock-in-trade of the business: Provided also that no authorisation shall be issued by the Additional Director or Additional Commissioner or Joint Director or Joint Commissioner on or after the 1st day of October, 2009 unless he has been empowered by the Board to do so. ....
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....y take such steps as may be necessary for ensuring compliance with this sub-section. Explanation.-For the removal of doubts, it is hereby declared that serving of an order as aforesaid under this sub-section shall not be deemed to be seizure of such books of account, other documents, money, bullion, jewellery or other valuable article or thing under clause (iii) of sub-section (1). (4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act. Explanation.-For the removal of doubts, it is hereby declared that the examination of any person under this sub-section may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Ind....
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....e may break open any box, locker Almirah etc., search any person about whom he suspects of secreting his person, books of account, other documents, money, bullion, jewellery or other valuable article or thing; may require any person to produce who is in possession of books of accounts etc. in electronic record; seize such books of account, other document, money, bullion, jewellery or other valuable article. He will put identification marks on the seized books of account, other document and also make inventory of the money, bullion, jewellery or other valuable article so seized. Such power of seizure cannot be exercised in case of stock in trade. 8.2. It may be pointed be pointed out here that section 132 of the Act is a comprehensive provision. The exercise of power under the search and seizure provision, having serious consequences on the searched person, requires caution and strict compliance. It provides for the circumstances under which the warrant of authorization has to be issued. The section also contains the procedure for search action and seizure. Though it may not be connected or relevant for the issue under consideration, we deem it fit to point out that there seems t....
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....nder the Act. Further Explanation 2 to the section states that the word "proceeding" means any proceeding in respect of any year, under the Act, which may be pending on the date of authorisation of search or which may have been completed on or before such date and includes also all proceedings under this Act which may be commenced after such date in respect of any year. 8.4. As per the provisions of section 132(4), for subjecting a person to examination, such person must be found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing. The money, bullion, jewellery or other valuable article or thing as referred to in subsection (4), ( hereinafter referred to as "assets"), are those which have been mentioned in clause (c) of subsection (1) to section 132, which means that the said assets must represent undisclosed income of the assessee. Though, as discussed above, section 132(1)(c) does not speak of " books of account" or "other documents", however, looking into the manner in which these words mentioned in the subsequent parts of the section and being used in conjunction with words money, bullion, jewellery ....
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....h account books or money which are in his possession and can record a statement to that effect. Under this provision, such statements can be used in evidence in any subsequent proceeding initiated against such per son under the Act. Thus, the question of examining any person by the authorised officer arises only when he found such person to be in possession of any undisclosed money or books of account. But, in this case, it is admitted by the Revenue that on the dates of search, the Department was not able to find any unaccounted money, unaccounted bullion nor any other valuable articles or things, nor any unaccounted documents nor any such incriminating material either from the premises of the company or from the residential houses of the managing director and other directors. In such a case, when the managing director or any other persons were found to be not in possession of any incriminating material, the question of examining them by the authorised officer during the course of search and recording any statement from them by invoking the powers under section 132(4) of the Act, does not arise. Therefore, the statement of the managing director of the assessee, recorded patently u....
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.... action at the business premises of Badalia Gems Pvt. Ltd., however, even there, he was not found in possession or control of any books of account, other documents or assets relevant to the assessment of his income. Even no incriminating material either in the shape of books of accounts/ other documents or in the form of assets representing his any undisclosed income was found during the course of search. Such a statement of his, having recorded in contravention of the statutory provisions and without the mandate of the law, would not have any evidentiary value and cannot be made basis for the impugned additions. Even the admission, if any, made during such an statement, which is recorded against the mandate of the statute, cannot be relied upon. The impugned additions are liable to be set aside on this score. B. Whether the loose sheet recovered in an unconnected earlier search action from the premises of third party can be brought in and used to confront the assessee during the course of search action: the validity of assessment thereof:- 9. The Ld. Counsel for the assessee has submitted that the search party has exceeded its jurisdiction to bring in the copies of the docum....
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....le, has submitted that these instructions clearly restrict the search party to proceed only on the basis of documents, evidences, assets etc. found at the premises and not to be outsourced from outside or external sources which has been done in this case. He has submitted that even nothing of sort was found out from searched premises which could have established link of the assessee or the company with the Kasera Group. That there is no provision under the Law which enables the search party to bring the documents, evidences etc. having been found and seized from a third party on a date much prior to the date on which the search is being conducted. The Ld. Counsel, therefore, has submitted that in that view of the matter, the search party has exceeded their jurisdiction in bringing the outside material alongwith them. He in this respect has also relied upon the search warrant of authorization issued u/s 132 r.w.r.112(1) of the Income Tax Rules- in Form 45, to submit that Form 45 specifically mentions in column (a) to (h) the duties of the authorized officer, which lacks to bring in the papers, documents, evidences etc. from external or outside sources to confront the searched party.....
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....________________________________ . [name of the person] to produce, or cause to be produced, books of account or other documents which will be useful for, or relevant to, proceedings under the Indian Income-tax Act, 1922, or under the Income-tax Act, 1961, he would not produce, or cause to be produced, such books of account or other documents as required by such summons or notice ; Sarvashri/Shri/Shrimati ___________________________________are/is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of the Indian Income-tax Act, 1922, or the Income-tax Act, 1961 ; And whereas I have reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing have been kept and are to be found in (specify particulars of the building/place/ vessel/vehicle/aircraft) which is within the area of my jurisdiction ; And whereas I have reason to believe that any delay in getting an authorisation under sub-section (1) of section 132 ....
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....-tax 9.2 We find force in the above submissions of the Ld. Counsel for the assessee. The search party has not been empowered either under the Act or under the Rules to bring any document, article, or any other thing along with them to the premises to be searched under the warrant of authorization. Rather a right has been given to the person whose premises has to be searched to have personal search of all the members of the search party before the start of the search and even after the conclusion of the search. Even in the Performa warrant of authorisation in Form 45, no such powers have been given to the search party to bring the outside material to the searched premises. In our view, the search party was not justified, rather, has acted in defilement of their jurisdiction to bring the seized material in the case of Kasera Group lying in their office record, to the premises of M/s Badalia Gems Pvt. Ltd in separate and subsequent search action carried out u/s 132 of the Act and confront the assessee on the said material especially when no incriminating material was found in relating to the search action in the case of the assessee carried out his residential premises and even no ....
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.... seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A: Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person : Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or re....
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....on is satisfied that the assets/material found during the search action relates to other person, then the Assessing officer of the searched person is supposed to handover/send that material to the Assessing Officer having jurisdiction over such other person and further that the jurisdictional Assessing Officer of the said other person will have to record a satisfaction that such material has a bearing on the determination of income of such other person and the six assessment years preceding the date of receipt of such material/books of account gets reopened and the Assessing Officer of such other person is required to make assessment in accordance with the provisions of section 153C of the Act. It is not open to the Assessing Officer of such other person to use that material in a subsequent assessment carried out u/s 153A of the Act in case of such other person unless the proceedings u/s 153C are pending against such other person on the date of search. Reliance in this respect can be placed on the decisions of the co-ordinate Delhi Bench of the Tribunal in the case of "DCIT vs Shivali Mahajan ITA No.5585/Del/2015 dated 19.03.2019; Trilok Chand Choudhry vs ACIT (ITA NO.5870/Del/2017....
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....from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed or twelve months from the end of the financial year in which books of account or documents or assets seized or requisitioned are handed over under section 153C to the Assessing Officer having jurisdiction over such other person, whichever is later: Provided also that in the case where the last of the authorisations for search under section 132 or for requisition under section 132A was executed during the financial year commencing on or after the 1st day of April, 2019,- (i) the provisions of clause (a) or clause (b) of this sub-section shall have effect, as if for the words "twenty-one months", the words "twelve months" had been substituted; (ii) the period of limitation for making the assessment or reassessment in case of other person referred to in section 153C, shall be the period of twelve months from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed or twelve months from the end of the financial year....
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....se sheets, in question, relied upon by the revenue, were brought by the search party along with them recovered in a search action carried out u/s 132 of the Act in the case of Kasera Group. No incriminating material whatsoever was found during the course of search action in the case of the assessee. The alleged incriminating material found in the case of a past search action in the case of third party i.e. Kasera Group was not acted upon and no proceedings u/s 153C of the Act were initiated or even contemplated and then, in our view, the Assessing Officer cannot make basis of such dead material in the subsequent assessment proceedings carried out in the case of the assessee u/s 153A of the Act to make the impugned additions, when the limitation to proceed u/s 153C on the basis of said looses sheets/incriminating material has already expired in terms of the provisions of section 153B of the Act. Moreover, no incriminating material was found during the search action in the case of the assessee. The assessee was not found in possession or control of any incriminating material or books of accounts. Under the circumstances, as per the provisions of section 132 of the Act read with provi....
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....issuance of notice u/s 143(2) as on the date of search action is to be adopted to construe as to whether the assessment is pending, then adopting the same criterion for reassessment, if the time period for issue of notice u/s 148 of the Act for the purpose of reassessment has not lapsed, the reassessment would be deemed to be pending on the date of search. Such a statutory time period for issuance of notice u/s 148 of the Act ranges from 6 to 10 years under the relevant provisions of the Act, for initiating re-assessment proceedings. In that event, if such an interpretation is given effect to, none of the six to ten assessment years on the date of search would ever be considered as unabated or completed. In our view, different interpretation of the term "pending" cannot be given in relation to "assessment" and "reassessment". Since, the word 'pending' has been used in context to both 'assessment' and 'reassessment', therefore, it has to be read in the same context for 'assessment' and 'reassessment'. Under the circumstances, in our view, the word pending would mean those assessments or reassessments, which have been initiated but not concluded on the date of search. If no assessmen....
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....m to be to re-open the completed/unabated assessments, unless any incriminating material is found with respect to concerned assessment year falling within last six years preceding the search. Therefore, on true interpretation of Section 153A of the Act, 1961, in case of a search under section 132 or requisition under section 132A and during the search any incriminating material is found, even in case of unabated/completed assessment, the AO would have the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under sections 147/48 of the Act, subject to fulfilment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of una....