TaxTMI 
TaxTMI 
2024 (4) TMI 976
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....mon, 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 explanation in respect of cash and jewellery found. In res....
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....rom 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 were advanced. However, the Kaseras could get refund of....
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....t 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 report was also called upon by the CIT(A) from the Assessing Off....
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....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 evidence. So far as the contention that the alleged loose sheets....
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.... 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/s 132 in Kasera Group. 7. For that the appellant could have been examined and statement could be recorded u/s 132....
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....ates 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 entire provision of law which renders the assessment bad-in- law, liable to be annulled and quashed. 19. For that the Ld. CIT (A) erred in not holding that the Ld. A.O. could not have asked the appe....
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....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 liability on the appellant which renders the assessment bad-in-law, liable to be quashed. 32. For that the Ld. Addl. CIT erred in granting approval without properly appreciating the alleged incriminating material, seized documents, inquiries made by the Inv. Wing and by the A.O., if any, du....
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....cipal 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 account, other documents, money, bullion, jewellery or other valuable article or thing are kept; (ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i) where the keys thereof are not available; (iia) search any person who has got out of, or is about to get into, or is in, the buildin....
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....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. [Explanation.-For the removal of doubts, it is hereby declared that the reason to believe, as recorded by the income-tax authority under this sub-section, shall not be disclosed to any person or any authority or the Appellate Tribunal.] (1A) Where any Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, in consequence of information in his possession, has reason to suspect that any books of account, other docu....
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....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 Indian Income-tax Act, 1922 (11 of 1922), or under this Act. (4A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed- (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true ; an....
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....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 to be an anomaly created with regard to the provisions of section 132(1)(c) when these provisions are compared or read with the other subsequent clauses/provisions of the section. Section 132(1)(c) prescribes the conditions in which the warrant for authorization for search can be issued which are that the competent authority must have information in its possession on the basis of which he has reason to believe that such person is in possession of any money, bullion, jewellery or other valuable article which represents either wholly or partly income or pr....
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....ullion, 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 or other valuable article or thing , hence, giving the reasonable interpretation in the same line as given in respect of assets found during the search action, what is deciphered is that the statement of such person can be recorded who is found to be in possession or control of such books of account or other documents which represent the undisclosed income. Though, the Explanation to section 132(4) provides that the examination of any person under subsection(4) may not merely be restricted to books of accounts, other documents or assets found during the se....
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.... valuable articles or things, nor any unaccounted documents nor any such incriminating material either from the premises of the company or from the residential houses of the managing director and other directors. In such a case, when the managing director or any other persons were found to be not in possession of any incriminating material, the question of examining them by the authorised officer during the course of search and recording any statement from them by invoking the powers under section 132(4) of the Act, does not arise. Therefore, the statement of the managing director of the assessee, recorded patently under section 132(4) of the Act, does not have any evidentiary value." 8.5.1. Hon'ble Delhi High Court in the case of " CIT vs Harjeev Aggarwal" reported in 241 Taxman 199(Delhi) has held in para 21 of the judgement as follows: "21. A plain reading of Section 132 (4) of the Act indicates that the authorized officer is empowered to examine on oath any person who is found in possession or control of any books of accounts, documents, money, bullion, jewellery or any other valuable article or thing. The explanation to Section 132 (4), which was inserted by the Direct Tax ....
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....sis 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 documents which were found and seized from the premises of Kasera Group. It has been contended that they were not empowered and authorized under the Act to bring in any sort of documents, evidences etc. in the premises being searched u/s 132 of the Act. The Ld. Counsel in this respect has relied upon the Central Board of Direct Taxes (CBDT) instructions/ Tax Payers' Charter, depicting the "Rights of the person to be searched" , copy of which was also served upon the assessee at the time of search as so mandatorily required by the CBDT. Rights of the person searched 1. To see the warrant o....
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.... 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. For the sake of ready reference, the extract of Form No.45 r.w.r. 112 being Warrant of Authorisation u/s 132 r.w.r. 112(1) is reproduced hereunder: - FORM NO. 45 [See rule 112] Warrant of authorization under section 132 of the Income-tax Act, 1961, and rule 112(1) of the Income tax Rules, 1962 To The Deputy Director, The Deputy Commissioner, The Assistant Director, The Assistant Commissioner, The Income-tax Officer, Whereas information has been laid before me and on the consideration thereof I have reason to believe that- a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 131 of the Income-tax Act, 1961, or a not....
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...., 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 from the Chief Commissioner or Commissioner having jurisdiction over Sarvashri/Shri/Shrimati________________________________________ may be prejudicial to the interests of the revenue ; This is to authorise and require________________________________________________________you [name of the Deputy Director or of the Deputy Commissioner or of the Assistant Director or of the Assistant Commissioner or the Income-tax Officer] __ (a) to enter and search the said building/place/vessel/vehicle/aircraft ; (b) to search any person who has got out of, or is about to get into, or is in, the building/place/vessel/vehicle/aircraft if you have reason to suspect that such person has secreted about his person any such books of account, other documents, mone....
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....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 incriminating material was found during the search action carried out in the case of M/s Badalia Gems Pvt. Ltd. at their business premises. Under the circumstances, the search conducted by the search party is vitiated and no reliance can be placed on the search and seizure reported or even statement recorded of any person during such a vitiated search action, as it fails the mandate of law. C. Whether the Assessing Officer was justified to rely upon the material seized during the search in case of third party without adhering to the provisions of section 153C of the Act: 10. We note that the loose sheets were found during course of a past search action in the case of third party namely Kasera Group. It was not in dispute that there were no documents that were seized from the premises of the assessee. The statutory ....
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...., 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 requisition is made and for the relevant assessment year or years as referred to in sub-section (1) of section 153A except in cases where any assessment or reassessment has abated. (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year- (a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 ....
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....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) dated 20.08.2019; and of the Hon'ble Delhi High Court in the case of PCIT (Central) vs. Anand Kumar Jain ITA 23/2021 vide order dated 12.02.2021. 10.2 The another crucial point herein is that u/s 153B of the Act, the limitation for completing such assessment/reassessment u/s 153C of the Act has been prescribed. The relevant part of section 153B is reproduced as under: "153B. Time limit for completion of assessment under section 153A.- (1) Notwithstanding anything contained in section 153, the Assessing Officer shall make an order of assessment or reassessment, - (a) in respect of each assessment year falling within six assessment years [and for the relevant assessment year or years] referred to in clause (b) of sub-section (1) of section 153A, within a period of twentyone months from the end of the financial year in which the last of the authorisations for search under section 132 or for requisit....
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....m 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:" 10.3 A perusal of the above referred to provisions of section 153B would reveal that in case incriminating material is found relating to a person other than the searched person, the limitation period for making the assessment of such other person has been prescribed. Now, the moot question before us is that in a case where some alleged incriminating material was found in a search action relating to the other person (assessee herein), however, the concerned Assessing Officer/Income Tax Authorities did not proceed under the provisions of section 153C of the Act, which is a special provision relating to the assessment of income in search cases and the limitation as prescribed under the provisions of section 153B of the Act expires and the Assessing Officer is precluded from proceeding agai....
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....essee. 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 provisions of section 153B of the Act, firstly the search party exceeded its jurisdiction in recording of statement of the assessee u/s 132(4) of the Income Tax Act, secondly by bringing the documents from its record and thereby confronting the assessee in respect of the said document during the recording of the statement would not infuse life in such dead documents. The assessee succeeds on this legal ground. D) Abated vs Non-abated Assessment:- 10. The next question before us is as to whether the proposition that no addition can be made in case no incriminating material is found during the course of search action in case of unabated (not pending) assessments for the relevant assessment year would be applicable in this case? The Hon'ble Supreme Court in the case of "Principal Commissioner of Income-tax, Central vs. Abhisar Buildwell (P.) Ltd." Reported in [2023] 149 taxmann.com 399 (SC) has deliberated upon the provisions of section 153A of the Act and has held that in case no incriminat....
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....der 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 assessment or reassessment has been initiated by issuing the notice u/s 143(2) or u/s 148 of the Act, as the case may be, then the same cannot be said to be pending on the date of search. 10.6 The co-ordinate Delhi Bench of the Tribunal in the case of Deputy Commissioner of Income-tax, Central Circle-I, New Delhi vs. Aggarwal Entertainment (P.) Ltd. [2016] 72 taxmann.com 340 (Delhi - Trib.), in para 10 & 11 of the order has held as under: " .......It is assessee's claim that the addition of Rs. 50 lacs was not tenable as the regular return had been filed and the same had been accepted u/s 143 (1) of the Act and that no material has been found during the search to justify the addition. In our considered opinion section 153A does not authorise the making of a de novo assessment in this particular assessment year. While under the first proviso, the AO is empowered to frame assessment for six years, under the second proviso only assessments which are pending on the date of initiation of search abate. The effe....