AI Drafter 
TaxTMI 
TaxTMI 
2024 (6) TMI 982
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....revenue in ITA No. 1163/Bang/2024 as follows: 1. The Order of the Learned CIT(A) is opposed to law and facts of the case 2. The CIT(A) erred in deleting the addition of Rs. 2,00,00,000/- made by the assessing officer ignoring the fact that the additions made are based on admission of income in the statement given during the course of search u/s. 132(4) of the Act. 3. The CIT(A) erred in deleting the addition ignoring the fact that the additions made was based on estimate slips found during the course of search which means that there was material found during the search proceedings. 4. The CIT(A) erred in deleting the addition ignoring the fact that the assessee offered the additional income of Rs. 2,00,00,000/- to tax in the statement u/s. 132(4) only after being confronted with the evidences found during the course of search. 5. The CIT(A) erred in giving relief to the assessee without going into the merits of the case. 6. For these and other grounds that may be urged upon, the order of the CIT(A) may be reversed and that assessment order to be restored. 2.1 Thus, the revenue challenged the deletion of addition in these thre....
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.... the position of law that, as far as the provisions of section 115BBE of the act is concerned the rate of taxation was at 30% upto 05.12.2016 and therefore the taxes payable on unexplained investment assessable u/s. 69A of the act was at 30% upto that date and under the circumstances in respect of unaccounted investments quantified as on 24.06.2016 the taxes payable were at 30% and not at 60% as determined by the Assessing Officer. 5. First, we adjudicate the revenue appeals in ITA Nos. 1163 to 1166/Bang/2023. We will consider the facts in ITA No.1163/Bang/2023 which are follows: 6. The ld. D.R. submitted that for the A.Y.2013-14 to A.Y. 201516, the of Ld. CIT(A) decided the appeal "ONLY ON QUESTION OF LAW" and "NOT ON MERITS" Reliance placed by ld. CIT(A) on the decision of Hon'ble Supreme Court in the case of Pr. CIT, Central-3, Vs. Abhisar Buildwell (P) Ltd. (2023) is patently wrong as erroneous facts are stated in his orders in para 4.7 (AY 2013-14), para 4.8 (AY 2014-15) & para 4.8. (AY 2015-16). The Ld. CIT(A) has made similar erroneous statements in para 4.7 (AY 2013-14), para 4.8 (AY 2014-15) & para 4.8. (AY 2015-16) and the same is reproduced below: "In view....
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.... can be made in respect of the completed assessments in absence of any incriminating material. " * PARA 14(v) "14. In view of the above and for the reasons stated above, it is concluded as under: v) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved." (Emphasis supplied) (iv) Whereas, in the case of the appellant, from A.Y.2013-14 to A.Y. 2015-16, no assessment was done. All original ROIs from A.Y.2013-14 to A.Y. 2015-16 WERE ONLY PROCESSED u/s 143(1). (v) PROCESSING OF ROI u/s143(1) IS HELD NOT TO BE ASS....
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....y & Sons, a partnership firm carrying on business of trading in gold jewellery and also silver articles. Action u/s. 132 of the Act was conducted in the case of the assessee on 24.06.2016. For the A.Y.2013-14, there were no material seized evidencing any escapement of income. However, during the course of search a statement was recorded from Mr. R. Ravish, Managing Partner of the firm under the provisions of section 132(4) of the Act. Though there were no evidences relevant to A.Y.2013-14, the search party has taken a statement u/s. 132(4) of the Act, wherein a declaration of Rs. 2,00,00,000/- was recorded as undisclosed sales for the A.Y.2013-14, even though no incriminating material was found. The assessee, however has retracted his statement, vide letter dated 09.10.2018 filed on 12.10.2018 during the course of assessment proceedings for the reason that, there were no evidences or incriminating material in support of the declaration and hence no such income accrued for the A.Y. 2013-14. Further, the legal position in regard to the reliability of statement u/s. 132(4) of the Act and also the justification for retraction have been brought out in a letter dated 02.11.2018 filed bef....
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....ted/unabated assessments, no addition can be made by the AO in the absence of any incriminating material found during the course of search u/s. 132 of the Act. From the assessment order, it is clear that neither the assessment for AY.2013-14 was pending and was abated nor any incriminating material was found and nor that the search assessment was made on that basis. This stand has been confirmed by several judicial decisions highlighted by the appellant. The above position has been re-affirmed by the Hon'ble Supreme Court of India in the case of Principal Commissioner of Income Tax, Central-3, V. Abhisar Buildwell (P) Ltd (2023) 149 Taxmann.com 399 (SC), the conclusion of which is reproduced as under: As per the provisions of Section 153A, in case of a search under section 132 or requisition under section 132A, the AO gets the jurisdiction to assess or reassess the 'total income' in respect of each assessment year falling within six assessment years. However, it is required to be noted that as per the second proviso to Section 153A, the assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years pending on t....
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....If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. In case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and In case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under sectio....
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....d during the course of search u/s 132 of the Act and the addition is not supported by any material other than statement recorded u/s 132(4) of the Act. In the assessment year 2013-14, the ld. AO observed that an addition of Rs. 2 Crores has been made on the basis of admission made by assessee u/s 132(4) of the Act on 24.6.2016. It is pertinent to reproduce the observations of the ld. AO as follows: "During the course of assessment proceedings on verification of the copies of the VAT assessment order for the financial year submitted by the VAT authorities u/s. 133(6) the additional turnover assessed for the month of July as per VAT order dated 24.04.2014 was determined at Rs. 1,74,49,842/- as against Rs. 1,52,97,186/-. According to the assessee the addition was an estimated addition on account of discrepancy in stock. Which means that there existed a discrepancy. Though the assessee has objected to the proposal to include the aforesaid amount as undisclosed turnover for A.Y 201314 without prejudice to the findings detected during search, it is noteworthy to mention that the partner Mr.Ravish was well aware of this order passed by the VAT authority on 29/04/2104 and he himse....
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....s not applicable in this case. The declaration has been made on sound footing and the retraction is therefore totally baseless. On the basis of the above discussion on the modus operandi observed to be followed by the said assessee's and discovery of authentic evidences as mentioned in the preceding paragraphs, a substantial amount of undisclosed/unaccounted income has been detected. The basis of arriving at the undisclosed income detected and admittance thereof has been discussed elaborately above. Accordingly, the income of Rs. 2,00,00,000/- unaccounted sales - is treated as the assessee's undisclosed income from business as per the findings during search and as declared u/s. 132(4). Addition : 2,00,00,000/- Similarly the income of Rs. 1,50,00,000/- being unaccounted URD purchases is treated as the assessee's undisclosed income from business as per the findings during search and as declared u/s. 132(4). Addition: Rs. 1,50,00,000/-" 8.2 As seen from the above, the above addition is not based on any cogent material other than the statement recorded u/s 132(4) of the Act. The placing reliance by ld. AO on the VAT records is misplaced w....
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....gs would abate and would converge/merge in proceedings u/s 153A. Accordingly the scope of assessment under section 153A would cover the pending return filed as well and would not be restricted to incriminating material found during the course of search. 6. Assessment u/s 143(3) completed. Since regular assessment proceedings have been completed & are not pending, there would be no abatement of proceedings. AO loses jurisdiction to review the completed assessment. Accordingly, the scope of assessment u/s 153A would be restricted to incriminating material found during the course of search. 7. Proceedings u/s 147 pending where: (a) Assessment originally completed u/s 143(3) OR (b) No assessment earlier completed u/s 143(3) Pending assessment/reassessment proceedings u/s 147 would abate and would converge/merge in proceedings u/s 153A. Accordingly, the powers of the AO, in both the cases, shall extent to: (a) Assess income that would validly be assessed in the pending proceedings u/s 147, and 8.4 In the light of above, it is to be noted that these two assessment years falls under category (4) in the above....
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....IBC Knowledge Park (P) Ltd. supra. "54. On a consideration of the relevant sections as well as judicial precedent referred to above, what emerges is that, Section 158BD of the Act deals with undisclosed income of a third party. However, insofar as the incriminating material of the searched person or other person detected during the course of search is concerned, the same can be considered during the course of assessment. Further, such incriminating material must relate to undisclosed income which would empower the Assessing Officer to upset or disturb a concluded assessment of the other person. Otherwise, a concluded assessment would be disturbed without there being any basis for doing so which is impermissible in law. Even in case of a searched person, the same reason would hold good as in case of any other person as observed by us, detection or the existence of incriminating material is a must for disturbing the assessment already made and concluded. But, at the same time, such can be at three stages: one, at the stage when. the reassessment is initiated, the second, at the stage during the course of reassessment and third, at u stage where the reassessment is altered by....
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....27.9.2014 respectively. Time limit to issue a notice u/s 143(2) of the Act was on or before 13.09.2014 & 30.09.2015 respectively. No notice u/s 143(2) of the Act was issued to the assessee on or before 30.4.2014 & 30.9.2015 for AY 2013-14 & 2014-15 respectively. Being so, framing of assessment u/s 143(3) of the Act has already been concluded by operation of law on the date of search action i.e. on 24.6.2010. As held by Special bench in the case of All Cargo Global Logistics Ltd. Vs. DCIT (2012) 18 ITR (Trib) 106 (Mumbai)(SB) that in case of assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A of the Act for which assessment shall be made for each of 2 assessment years separately if there is seized/incriminating material, if any. In other cases, in addition to the income that has already been assessed, the assessment u/s 153A of the Act will be made on the basis of incriminating material, which in the context of relevant provisions means (i) books of accounts, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the....
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....appeals in ITA Nos. 1163 & 1164/Bang/2024 are dismissed. ITA No. 1165/Bang/2023 (AY 2015-16): 9. In this appeal the revenue has raised the following revised grounds of appeal: 1. The order of the Learned CIT(A) is opposed to law and facts of the case. 2. The CIT(A) erred in deleting the addition of Rs. 4,00,00,000/- made by the Assessing Officer ignoring the fact that incriminating material was found during the course of search and a part of the same was shown and confronted to the assessee while recording his statement u/s 132(4) of the Act and the additions made are based on the response given by the assessee when confronted with the incriminating materials. 3. The CIT(A) erred in deleting the addition of Rs. 4,00,00,000/- made by the assessing officer ignoring the fact that the additions made are based on undisclosed income admitted by the assessee when confronted with the incriminating material found during the course of search. 4. The CIT(A) erred in deleting the addition ignoring the fact that the assessee has offered additional income of Rs. 4,00,00,000/- to tax in his sworn statement recorded u/s. 132(4) of the Act after seeing the ....
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....These loose sheets are actually estimate of sale figures given to customers who wish to purchase gold jewellery. The estimate itself serves as a proof of purchase of jewellery from the assessee in case the customer does not insist for a proper bill. The assessee was confronted with the evidence found. The assessee admitted unaccounted sales that are being made and accordingly voluntarily offered additional income as under - On account of undisclosed sales - Assessment Year Undisclosed sales 2013-2014 Rs. 2,00,00,000/- 2014-2015 Rs. 2,00,00,000/- 2015-2016 Rs. 3,00,00,000/- TOTAL Rs. 7,00,00,000/- On account of unaccounted URD Purchases - Assessment Year Unaccounted URD Purchases 2014-2015 Rs. 1,50,00,000/- 2015-2016 Rs. 1,00,00,000/- TOTAL Rs. 2,50,00,000/- 10.2 In the Statement recorded u/s. 132(4), the assessee admitted that a part of the sales is made through the estimate slips without a proper bill and corresponding entry into the sales register and voluntarily offered the undisclosed sales to tax. The assessee, however, retracted from the declaration made u/s. 132(4) and no income was offered to tax on ....
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.... 100 sheets are actually estimate of sale figures given to customers who wish to purchase gold jewellery. The estimate itself serves as a proof of purchase of jewellery from the assessee in case the customer does not insist for a proper bill. (b) When confronted with the findings and the incriminating material found, which clearly evidenced that sales were being affected and a part of the sales were not at all accounted, the assessee admitted unaccounted sales that are being made and accordingly voluntarily offered additional income on account of undisclosed sales. (c) The retraction of the declaration given is also not tenable as the statement was not given under any stress and that the claim of the assessee that the assessee had no time to look for evidences is also not acceptable. The retraction is totally an afterthought as the declaration given was confirmed on three different occasions by Sri Ravish, before the DDIT(Inv), Unit-I, Mangalore vide statement recorded u/s. 1312 on 27.06.2016, 25.07.2016 and again on 03.08.2016. (d) The incriminating material found in the form of estimate slips was the basis on which the assessee voluntarily declared inco....
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....ough there were no evidences relevant to A.Y.2015-16, the search party has taken a statement u/s. 132(4) of the act wherein the following income was allegedly disclosed even though there was no incriminating material found. Undisclosed sales Rs. 3,00,00,000/- Unaccounted URD purchases Rs. 1,00,00,000/- Rs. 4,00,00,000/- 12.1 The ld. A.R. submitted that the assessee however has retracted this statement for the reason that, there were no evidences or incriminating material in support of the declaration and hence no such income accrued for the A.Y.2015-16. Accordingly in the return filed in response to notice u/s. 153A of the act on 22.10.2017, no income was declared in regard to this declaration which was under duress and there was no material supporting the same. 12.2 The ld. A.R. submitted that the Assessing Officer has concluded the assessment u/s. 143(3) r.w.s 153A of the act on 21.12.2018 wherein a total addition of Rs. 4,00,00,000/- has been made to the income declared. The Assessing Officer has made this addition relying solely on the statement recorded u/s. 132(4) of the act and without any supporting evidence to corroborate or any incriminating....
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....ed in subsection (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to subsection (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Therefore, the intention of the legislation seems to be that in case of search only the pending assessment/reassessment proceedings shall abate and the AO would assume the jurisdiction to assess or reassess the 'total income' for the entire six years period/block assessment period. The intention does not seem 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 ....
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....) has basically highlighted the fact that, for the A.Y.2015-16 there was no assessment pending which got abate and therefore in the absence of any incriminating material seized during the course of search no additions can be made and no assessment order could have been made under the provisions of section 143(3) r.w.s 153A of the act. 12.5 In the backdrop of the above facts, the stand of the Assessing Officer and the findings of the Commissioner of Income Tax (Appeals) in his order, the ld. A.R. submitted on each of the grounds of appeal of the revenue as under: - GROUND No. 1 OF THE GROUNDS OF APPEAL (a) The order of the Learned CIT(A) is opposed to law and facts of the case. 12.5.1 He relied on the findings of the ld. Commissioner of Income Tax (Appeals) in paragraph 4.7 & 4.8 extracted above. He further submitted that the ld. Commissioner of Income Tax (Appeals) has relied on the decision of Hon'ble Supreme Court in the case of Pr. Commissioner of Income Tax, Central-3 V. Abhisar Buildwell (P) Ltd (2023) 149 Taxmann.com 399 (SC). Hence, the ground that, the order is opposed to law and facts of the case does not sustain. In addition to the above, he ....
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....ue has taken up a ground that, the additions made was based on estimate slips found during the course of search and has inferred that, there was material during the search proceedings. He denied the above findings of the Assessing officer. The issue involved in the present case is an addition of Rs. 4,00,00,000/- for the A.Y.2015-16 which comprises of alleged undisclosed sales of Rs. 3,00,00,000/- and undisclosed purchases of Rs. 1,00,00,000/-. It is the case of the assessee that, there was no material seized during the course of search relevant for the A.Y.2015-16. In this connection, he extracted a statement recorded u/s. 132(4) of the act on 24.06.2016 which forms the basis for the total addition of Rs. 4,00,00,000/- to the income declared for the A.Y.2015-16. Basis for alleged undisclosed sales of Rs. .3,00,00,000/- "Q.16: During the course of search proceedings today in your premises, loose sheets in exhibit marked A/SRS/04 containing loose sheets 113 in number. Serially numbered loose sheets from page 104 to page 113 contains estimates of sales figures. However, the same are not in your sales register. Please comment on the same. Ans: A part of our ....
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....terial A/SRS/04. The relevant material is only a reconciliation of figures extracted from regular books maintained. The material is not incriminating and therefore no addition of Rs. 1,00,00,000/- could have been made to the income declared towards undisclosed purchases. 12.5.8 He submitted that, there is no evidence for the A.Y.2015-16 and therefore the addition made above is erroneous and not as per the provisions of the act. The addition made is only on an estimate relying on certain material relatable to A.Y.2017-18 and not to A.Y.2015-16. The stand taken by the Assessing Officer that the addition made was on the basis of seized material is factually incorrect. 12.5.9 He submitted that the Commissioner of Income Tax (Appeals) rightly deleted the addition of Rs. 4,00,00,000/- made by the Assessing Officer considering the position of law and facts of the case. He relied on Commissioner of Income Tax (Appeals) findings and decision, hence in the light of the above facts he submitted that, the ground taken up by the revenue is on misrepresentation of facts and hence the ground would not sustain. GROUND No. 4 OF THE GROUNDS OF APPEAL (d) The CIT(A....
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....elying only on confessional statement no additions can be made. 4. We also rely on the decision of High Court of Gujarath in the case of Pr.Commissioner of Income Tax, Ahmedabad V. Deepak Jashwanthlal Panchal (2017) 88 Taxmann.com 611 (Guj), wherein it is held that, only undisclosed income and undisclosed assets detected during search can be brought to tax in assessment year under the provisions of section 153A of the act. As recorded by the Assessing Officer in the assessment, the only material relied upon are certain estimates of the transactions stated to have been carried out during the F.Y.2016-17 relevant to A.Y.2017-18. There is no material for the A.Y.2015-16. There is no evidence of either undisclosed asset or undisclosed income. Hence, we submit that, no additional income could have been brought to tax for the A.Y.2015-16. 5. We rely on the decision of ITAT, Bangalore Bench 'C' in the case of BMM Ispat Ltd V. DCIT, Central Circle - 1(2), Bangalore (2018) 93 Taxmann.com 76 (Bangalore Trib), wherein in the context of the provisions of section 153A of the act, the Hon'ble Tribunal has held as under in para 3.4.5 of its order. The said paragraph is ....
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....3 The legal issue emanating on such facts that in the absence of any incriminating material/evidence, no addition can be sustained under S.153A is no longer res integra in view of the decision of the Hon'ble jurisdictional High Court in the case of Saumya Construction (P) Ltd and Devangi Alias Roopa in Tax Appeal No. 54 of 2017 order dated 02.02.2017. Similar view was earlier taken by the Hon'ble Delhi High Court in the case of Kabul Chawla." In the light of the above ratio, we submit that, for the facts of the appellant proceedings u/s. 153A of the act could not have been initiated and the additions made without corroborative evidences would not sustain. 7. We rely on the decision of High Court of Gujarat in the case of Pr.Commissioner of Income Tax-4 V. Saumya Construction (P) Ltd (2017) 81 Taxmann.com 292 (Guj) The Hon'ble High Court of Gujarath has held that, unless there is incriminating material found during the course of search no addition can be made in a proceedings u/s. 153A of the act. It is further held that, the material collected later cannot be basis for addition. While doing so the Hon'ble High Court of Gujarath has relied on the ....
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....sessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. Therefore, it is clear even if an assessment order is passed under Section 143(1) or 143(3) of the Act, the Assessing Officer is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, unearthed during the search. After such reopening of the assessment, the Assessing Officer is empowered to assess or reassess the total income of the aforesaid-years. The condition precedent for application of Section 153A is there should be a search under Section 132. Initiation of proceedings under Section 153A is not dependent on any undisclosed income being unearthed during such search. The proviso to the aforesaid section makes it clear the....
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....e Assessing officer is erroneous insofar as it is prejudicial to the interest of the revenue. Once the order passed by the Assessing officer gets reopened, there is no order which can be said to be erroneous insofar as it is prejudicial to the-interest of the revenue which confers jurisdiction on the Commissioner to exercise the power of the jurisdiction." 13.1 Further in the present case, return of income filed by assessee that was processed u/s 143(1) of the Act and the time limit for issue of notice u/s 143(2) of the Act not expired which is available up to 30.9.2016 and the intimation is not akin to assessment and time limit for notice u/s 143(2) of the Act is not expired, even though return has been processed, it will be a case where return has not been attained finality Consequently, ld. AO would have authority/jurisdiction to assess the entire income similar to jurisdiction in regular assessment u/s 143(3) of the Act as held by All Cargo Logistics Ltd. cited (supra). As such, the quashing of assessment by ld. CIT(A) is not possible. 13.2 Hence, the assessment was pending as on the date of assessment since the search took place on 24.6.2016 return was filed for this ass....
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....ld. AO relied on the statement recorded u/s 132(4) of the Act where he considered the above loose slips while recording the statement on 27.6.2016 u/s 132(4) of the Act wherein Mr. R. Ravish has stated as follows: 13.7 In question No. 17 also he answered as follows: 13.8 However, the same has not offered for taxation by assessee in his return of income filed u/s 153A of the Act. The assessee stated that the statement was made during the course of search action in statement recorded u/s 132(4) of the Act has no evidentiary value which was not supported by any material evidence in support of the declaration obtained from the assessee and the same has been made without understanding position of law and also mistaken impression of facts. Further, the search procedure went on for a long period without any break and the partner was under great pressure and stress. The statement has been given under stress and in the absence of any corroborative evidence no addition could be made. To make an addition, the ld. AO shall have sufficient material in the form of incriminating/seized material. In the present case, the case of the assessee is that there were no corresponding seized materia....
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.... scribblings and loose sheets to issue the assessment order. A perusal of the seized material which is extracted in the assessment order and the reply to the queries from the statement of Mr. R. Ravish which is relied upon would show that they are not conclusive evidence to hold that the assessee has earned any undisclosed income. The conclusions drawn by the AO cannot be inferred from the seized material. The conclusion drawn by the AO cannot be deduced either from the seized material or from the statement of Mr. R. Ravish. The seized material does not mention anything about the alleged unaccounted transactions by the assessee nor the details of when such alleged undisclosed sales or unaccounted purchases. There is no mentioning of any details in these loose slips. They are mere loose slips cannot be treated as incriminating material to sustain the addition. There is nothing in the loose sheets to evidence the undisclosed sales or unaccounted purchases. 13.13 The AO extracted the loose sheets in page Nos. 5 to 8 in the assessment order and confronted the same to Mr. R. Ravish. The reply of Mr. R. Ravish is reproduced at page 9 of the assessment order vide question No. 16 and he....
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....ain figures mentioned as estimates. Nothing can be made out as to what, those entries are all about. These loose slips do not even contain any details or name of the parties to whom the goods are sold or service rendered. Even regarding unaccounted purchase there is no mention of any parties therein. The investigating team also not collected any details of the parties involved therein, so as to make sales and purchase and the payment or receipt of cash or cheque corresponding to these transactions. These loose slips cannot be incriminating material or evidence to support the contention of the AO that there were unaccounted transactions carried on by the assessee. This is a mere case of guess work of investigating team as well as assessing officer as there is no concrete evidence to-prove such unaccounted transactions. The AO has hastily presumed that these loose slips contain details of unaccounted sales and purchases by extracting answer to question No. 16 & 17 vide statement recorded u/s 132(4) of the Act. In our opinion, the additions were made as per AO's discretion and arrived at an imaginary amount by treating the unaccounted transactions. This addition has no legs to stand a....
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....ame or seal of the assessee. Being so no credence to be given to this document. 13.20 The Bangalore Tribunal in the case of Kirloskar Investments Finance Ltd. v. Assistant Commissioner of Income-tax [1998] 67 ITD 504 (Bang.) held that the provision of the copy of the statement or letters is not sufficient opportunity. Oral evidence of persons concerned with the transaction are important piece of evidence and before it could replace the written evidence, the party against whom such oral evidence is being used must be allowed the opportunity of examining the person because, both the types of evidences need to weighed properly before rejecting one for the other. 13.21 The seized material shows vague figures presumed by the AO to be unaccounted transactions. These are unsigned documents and not supported by any corroborative material. Further the alleged parties to the transactions were not examined or cross-examined. At this point, it is appropriate to rely on the judgment of the Mumbai Bench in the case of ACIT v. Layers Exports P. Ltd [2017] 53 ITR (Trib) 416 (Mumbai), wherein it was held that no addition could be simply made on the basis of uncorroborated notings in the loose....
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....involved in the matter or he has done some act during that period, which may have co-relations with the random entries. In case we do not insist for all these, the process of law can be abused against all and sundry very easily to achieve ulterior goals and then no democracy can survive in case investigations are lightly set in motion against important constitutional functionaries on the basis of fictitious entries, in absence of cogent and admissible material on record, lest liberty of an individual be compromised unnecessarily. In view of the above, reliance on Seized material for making addition cannot be sustained. 13.23 The Delhi Tribunal in Vijay Kumar Aggarwal v. ACIT 2Q17 (5) TMI 1354 held that it is clear that the presumption of facts u/s 292C of the Act is rot a mandatory or compulsory presumption but a discretionary presumption. Since, the word used in the said Section is "may be" and not "shall". Secondly, such a presumption is rebuttable presumption and not a conclusive presumption because it is a presumption of fact not a presumption of law. In the present case, the assessee from the very beginning stated that the documents found during the course of search did not....
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....ter 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 make the remarks as mentioned above, (para 7) If the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show-Cause Notice, (para 8)" 13.26 The Delhi Tribunal in the case of Veena Gupta v. ACIT in ITA No. 5662/Del/2018 dated 27.11.2018 relying on the above judgment of Hon'ble Supreme Court in the case of Andaman Timber Industries (supra) quashed the assessment order on the reason of not providing cross-examination of witnesses whose statements were recorded. 13.27 Further, the Hon'ble Supreme Court in the case of CIT v. Odeon Builders (P.) Ltd., 418 ITR 315 (SC) head-note is as follows: "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 infor....
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....he Assessing Officer. His conduct neutralises his value as a witness. A man indulging in double-speaking cannot be said by any means a truthful man at any stage and no court can decide on which occasion he was truthful. If Shri Sukla is neutralised as a witness what remains is the accounts, vouchers, challans, bank accounts, etc. But we would observe here that which way lies the truth in Shri Sukla's depositions, could have been revealed only if he was subjected to a cross-examination by the assessee. As a matter of fact, the right to cross-examine a witness adverse to the assessee is an indispensable right and the opportunity of such cross- examination is one of the corner-stones of natural justice. Here Shri Sukla is the witness of the Department. Therefore, the Department cannot cut short the process of taking oral evidence by merely having the examination-in-chief. It is the necessary requirement of the process of taking evidence that the examination-in-chief is followed by cross-examination and re- examination, if necessary. 9. It is not just a question of form or a question of giving an adverse party its privilege but a necessity of the process of testing the tru....
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....Therefore, it is necessary to delve out the truth from him and for that matter a cross-examination is necessary. Secondly, if the statement of Shri Sukla as a witness against the adverse party, the assessee, is relied upon as truthful, still remains the question of estimation of the profit. The assessee no doubt has given a comparative instance of gross profit rate but it is also necessary for the Department to come to a finding as to the norm of the gross profit on the basis of comparative cases. Therefore, it is the duty of the Assessing Officer to counter the comparative statement cited by the assessee before he can have the option to estimate the gross profit. Again, it is the comparative instance that alone can be the foundation of such estimate in case the accounts are really found to be unreliable and requiring to be rejected. Therefore, in the interest of justice for both the parties, the assessee and the Revenue, it is necessary for us to direct the Tribunal to remand the case to the Assessing Officer for reconsidering the whole matter in the light of the observations made by us in the foregoing and redo the assessment accordingly. All opportunities should be given to the ....
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....vidence on record is not sufficient to uphold the stand of AO that assessee has unaccounted transactions. 13.32. There are various loose sheets, scribblings and jottings having no signature or authorization from the assessee's side. These are unsubstantiated documents and there is nothing to suggest any undisclosed assets of assessee found during the course of search. More so, it does not show any recovery of the undisclosed assets in the form of landed property, building, investments, money, bullion, jewellery or any kind of movable or immovable assets. 13.33. Being so, the seized material relied by the assessing officer for sustaining addition is not speaking one in itself and also not speaking in conjunction with some other evidence which the authorities found during the course of search or post search investigation. Thus, the well settled legal position is that a nonspeaking document without any corroborative material, evidence on record and finding that such document has not materialised into transactions giving rise to income of the assessee which had not been disclosed in the regular books of accounts of the assessee has to be disregarded for the purpose of assessm....
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....ets in the form of landed property, building, investments, money, bullion, jewellery or any kind of movable or immovable assets. 13.35 Further, we find that Hon'ble Delhi High Court in the case of PCIT Vs Best Infrastructure Private Limited, 397 ITR 82 has held that statement under section 132(4) in the itself does not constitute incriminating material. The relevant finding of the Hon'ble High Court is reproduced as under: "38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax v. Harjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts in Smt. Dayawanti Gupta v. CIT (supra) where the admission by the Assessees themselves on critical aspects, of failure to maintain accounts and admission that the seized documents reflected transactions of unaccounted sales and purchases, is non-existent in the present case. In the said case, there was a factual finding to the effect that the Assessees were habitual offenders, indulging in clandestine operations whereas there....
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....urvey operations as they fail to bring the undisclosed income to tax in a sustainable manner leave alone levy of penalty or launching of prosecution. Further, such actions show the Department as a whole and officers concerned in poor light. 2. I am further directed to invite your attention to the Instructions/Guidelines issued by CBDT from time to time, as referred above, through which the Board has emphasized upon the need to focus on gathering evidences during Search/Survey and to strictly avoid obtaining admission of undisclosed income under coercion/undue influence. 3. In view of the above, while reiterating the aforesaid guidelines of the Board, I am directed to convey that any instance of undue influence/coercion in the recording of the statement during Search/Survey/Other proceeding under the IT Act, 1961 and/or recording a disclosure of undisclosed income under undue pressure/coercion shall be viewed by the Board adversely." From the above Circular, it is amply clear that the CBDT has emphasized on its officers to focus on gathering evidences during search/survey operations and strictly directed to avoid obtaining admission of undisclosed income u....
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.... for any purpose and, if the statement appears to have been obtained by any inducement, threat, coercion or by any improper means, that statement must be rejected brevi manu. At the same time, it is to be noted that, merely because a statement is retracted, it cannot be recorded as involuntary or unlawfully obtained. It is only for the maker of the statement who alleges inducement, threat, promise, etc. to establish that such improper means have been adopted. However, even if the maker of the statement fails to establish his allegations of inducement, threat, etc., against the officer who recorded the statement, the authority, while acting on the inculpatory statement of the maker, is not completely relieved of his obligation at least subjectively to apply its mind to the subsequent retraction to hold that the inculpatory statement was not extorted. It thus boils down to this that the authority or any Court intending to act upon the inculpatory statement as a voluntary one should apply its mind to the retraction and reject the same in writing. It is only on this principle of law that this Court, in several decisions, has ruled that, even in passing a detention order on the basis of....
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.... 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 for making the assessment, but only to the extent it is relatable to the incriminating evidence/ material unearthed or found during search. In other words, there must be a nexus between the statement recorded and the evidence/ material found during search in order to for an assessment to be based on the statement recorded." * In Dr. E.G. Memorial Trust v. CIT (Exemption), Kolkata2017 (11) TMI 1586 * ITAT Kolkata, the Tribunal held as under: - "6. We have carefully considered the entire gamut of facts, rival contentions raised by the parties before us and also the material referred to during the course of hearing. In the instant case originally Id. CIT(Bx) cancelled the registration certificate u/s. 12A of the Act vide order dated 22-2-2016. Against the order of Ld, CIT(Ex) assessee preferred an appeal who directed the Revenue to provide an opportunity of cross-examination to assesse....
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.... "26. In view of what has been stated hereinabove we are of the view that this explanation seems to be more convincing, has not been considered by the authorities below and additions were made and/or confirmed merely on the basis of statement recorded under section 132(4) of the Act Despite the fact that the said statement was later on retracted no evidence has been led by the Revenue authority. We are, therefore, of the view that merely on the basis of admission the assessee could not have been subjected to such additions unless and until, some corroborative evidence is found in support of such admission. We are also of the view that from the statement recorded at such odd hours cannot be considered to be a voluntary statement, if it is subsequently retracted and necessary evidence is led contrary to such admission. Hence there is no reason not to disbelieve the retraction made by the Assessing Officer and explanation duly supported by the evidence. We are, therefore, of the view that the Tribunal was not justified in making addition of Rs. 6 lakhs on the basis of statement recorded by the Assessing Officer under section 132(4) of the Act. The Tribunal has committed an erro....
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....2008) 296 ITR 619 (Del) (vii) CIT vs. Vivek Aggarwal (2015) 56 taxmann.com 7 (Del) (viii) CIT vs. Salek Chand Agarwal (2008) 300 ITR 426 (All) (ix) CIT vs. Dinesh Jain (HUF) 352 ITR 629 (Del) 13.46 We find that the conclusions reached by the Assessing Officer are merely based on presumptions and assumptions without bringing corroborative material on record. It is settled position of law that no addition in the assessment can be made merely based on assumptions, suspicion, guess work and conjuncture or on irrelevant inadmissible material. Reliance can be placed in this regard on the following decisions: (i) Dhirajlal Girdharilal vs. CIT (1954) 26 ITR 736 (SC) (ii) Dhakeswari Cotton Mills Ltd. vs. CIT (1954) 26 ITR 775 (SC) (iii) CIT vs. Maharajadhiraja Kameshwar Singh of Darbhanga (1933) 1 ITR 94 (PC) (iv) Lalchand Bhagat Ambica Ram vs. CIT (1959) 37 ITR 288 (SC) (v) Umacharan Shaw & Bros vs. CIT (1959) 37 ITR 271 (SC) (vi) Omar Salay Mohamed Sait vs. CIT (1959) 37 ITR 151 (SC) 13.47. Further, the Hon'ble Delhi High Court in the case of CIT vs. Dinesh Jain (HUF), 352 ITR 629 after referring to the....
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....es in the present appeals pertains to whether the ITAT was right in deleting additions made under Section 68 of the Act by holding that no assessment could have been made on mere presumption of existence of incriminating material. 19. Undisputedly, during the period of search, no incriminating material appears to have been found. However, the Revenue proceeded to issue notice under Section 143(2) of the Act on the pretext of the statements of the Directors of the respondent-assessee companies recorded under Section 132(4) of the Act and material seized from the search conducted on Jain group of companies. The assessment order was also passed under Section 143(3) read with Section 153C of the Act making additions under Section 68 of the Act. 20. However, it is an undisputed fact that the statement recorded under Section 132(4) of the Act has better evidentiary value but it is also a settled position of law that addition cannot be sustained merely on the basis of the statement. There has to be some material corroborating the content of the statements. 21. In the case of Kailashben Manharlal Chokshi v. CIT1, the Gujarat High Court held that the additions cou....
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....nd if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the Explanation to section 132(4) of the Act. However, such statements on a stand alone basis without reference to any other material discovered during search and seizure operations would not empower the Assessing Officer to make a block assessment merely because any admission was made by the assessee during search operation. [Emphasis supplied] 23. In our opinion, the Act does not contemplate computing of undisclosed income solely on the basis of statements made during a search. However, these statements do constitute information, and if they relate to the evidence or material found during the search, they can be used in proceedings under the Act, as specified under Section 132(4) of the Act. Nonetheless, such statements alone, without any other material discovered during the search which would corroborate said statements, do not grant the AO the authority to make an assessment. 24. Coming to the findings of the ITAT with respect to incriminating material in the cas....
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....ent has to relate with the assessee. The relevant portion of the said decision is extracted herein below: - (iv) Although section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the Assessing Officer 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 the seized material." [Emphasis supplied] 27. Recently, this Court, in the case of Saksham Commodities Limited v. Income Tax Officer, Ward 22(1), Delhi & Anr6, while relying upon the decision of the Supreme Court in Abhisar Buildwell (supra) and this Court's decision in the case of CIT v. RRJ Securities Ltd.7, upheld the position of law that the AO would not be justified to assess income in case no incriminating material is found during the search. The relevant paragraph is reproduced herein below: - "54. In any case, Abhisar Buildwell, in our considered opinion, is a decision which conclus....
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.... 28. So far as the submission made by the learned counsel for the Revenue that the AO acted on a bona fide belief that the date of search has to be taken as the date of initiation of proceedings under Section 153C of the Act is concerned, it is apposite to refer to our decision in the case of CIT v. Ojjus Medicare (P) Ltd.8 This Court, in the said case, reiterated the already settled law that the date of initiation of assessment proceedings under Section 153C would be calculated from the date of handing over of the books of accounts, documents or assets seized to the jurisdictional AO of the non-searched person. The relevant paragraphs of the said decision are extracted herein below: - "K. SUMMARY OF CONCLUSIONS 119. We thus record our conclusions as follows: A. Prior to the insertion of Sections 153A, 153B and 153C, an assessment in respect of search cases was regulated by Chapter XIVB of the Act, comprising of Sections 158B to 158BI and which embodied the concept of a block assessment. A block assessment in search cases undertaken in terms of the provisions placed in Chapter XIVB was ordained to be undertaken simultaneously and parallelly to a regular....
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....' as well as for "the relevant assessment year". The AYs', which would consequently be thrown open for assessment or reassessment under Section 153C follows lines pari materia with Section 153A. D. The First Proviso to Section 153C introduces a legal fiction on the basis of which the commencement date for computation of the six year or the ten year block is deemed to be the date of receipt of books of accounts by the jurisdictional AO. The identification of the starting block for the purposes of computation of the six and the ten year period is governed by the First Proviso to Section 153C, which significantly shifts the reference point spoken of in Section 153A(1), while defining the point from which the period of the "relevant assessment year" is to be calculated, to the date of receipt of the books of accounts, documents or assets seized by the jurisdictional AO of the non-searched person. The shift of the relevant date in the case of a non-searched person being regulated by the First Proviso of Section 153C(1) is an issue which is no longer res integra and stands authoritatively settled by virtue of the decisions of this Court in SSP Aviation and RRJ Securities....
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....e search, which is the basis for an assessment under Section 153A of the Act. Therefore, the relevant AY in the present case would come under the block of six AYs immediately preceding the AY in which the satisfaction note was recorded by the AO of the respondent-assessee companies. 30. Further, in the case of M/s Design Infracon Pvt. Ltd., the ITAT held that there is violation of principles of natural justice as neither the statement of owner of Jain group of companies was provided to the said company, nor the opportunity of cross-examination was given. The ITAT in paragraph No. 23 has held as under: - "23. Now, coming to Design Infracon (P) Ltd., we find from the material available on record that there is brazen violation of principles of natural justice inasmuch as neither the statement of Mr. Jain recorded at the time of search nor his cross examination was provided to the assessee by both the lower authorities despite specific and repeated requests made by the assessee in this regard. The Hon'ble Supreme Court in the case of M/s Andaman Timber Indusgies vs. CCE reported in 281 CTR 241 has held that not giving opportunity of cross examination makes the ent....
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....authorities being quasi- judicial authorities are bound by the principles of natural justice. The relevant paragraph is extracted herein below: - "2. Now, the law is well settled that tax authorities entrusted with the power to make assessment of tax discharge quasi- judicial functions and they are bound to observe principles of natural justice in reaching their conclusions. It is true, as pointed out by this Court in Dhakeswari Cotton Mills Ltd. v. CIT [AIR 1955 SC 154 : (1955) 1 SCR 941 : (1955) 27 ITR 126] that a taxing officer "is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a court of law", but that does not absolve him from the obligation to comply with the fundamental rules of justice which have come to be known in the jurisprudence of administrative law as principles of natural justice. It is, however, necessary to remember that the rules of natural justice are not a constant: they are not absolute and rigid rules having universal application. It was pointed out by this Court in Suresh Koshy George v. University of Kerala [AIR 1969 SC 198 : (1969) 1 SCR 317 : (1969) 1 ....
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....rovide any details about the incriminating material. Therefore, a failure on the part of the Revenue to manifest as to how the material gathered from the search of Jain group of companies belonged to the respondent-assessee group and the same is incriminating, vitiates the entire assessment proceedings. 36. Accordingly, we find no reason to intermeddle with the order of the ITAT which has rightly set aside the assessment order and deleted the additions made therein. 37. In view of the aforesaid and on the basis of the findings of fact arrived at before the authority, these appeals do not raise any substantial question of law and consequently, they stand dismissed. Pending applications, if any, are also disposed of." 13.50 The ratio that emerges from the aforesaid decisions is that a sworn statement cannot be relied upon for making any addition and must be corroborated by independent evidence for the purposes of making assessments. 13.51 In view of the above discussion, we are of the opinion that addition cannot be made on the basis of statement recorded u/s 132(4) of the Act supported by the unsubstantiated loose slips. Accordingly, the addition is deleted t....
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....urces for investment made by the assessee are from income generated from jewellery business, the investments made partakes the character of undisclosed income. 7. The CIT(A) erred in giving relief to the assessee without going into the merits of the case. 8. For these and other grounds that may be urged upon, the order of the CIT(A) may be revered and that assessment order to be restored. 15.2 The assessee in ITA No. 1156/Bang/2023 has raised the following grounds of appeal: 1. "The order of the learned Commissioner of Income Tax (Appeals)-2, Panaji, Goa is opposed to the facts of the case and law applicable to it. 2. The learned Commissioner of Income Tax (Appeals)-2, Panaji, Goa erred in holding that, stock of jewellery valued at Rs. 1,36,73,613/- found at the residence of partners has to be considered as undisclosed investment u/s. 69B and tax at the rate of 60% UIs. 115BBE of the act, ignoring the fact that, these items were excess stock of the business but was kept at the residence and the said stock was offered to tax in the hands of firm and assessed as business income in the assessment and therefore should have been taxed as income und....
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....d stock 93,63,957/- Undisclosed stock (at Shop) 1,52,07,375/- Undisclosed stock (Residence) 1,36,73,614/- Undisclosed sale of silver 6,45,344/- ---------------------- 5,48,60,039/- 16.2 It is the case of the assessee that the above income is assessable under the head business and not under any of the provisions like 68/69A, B, C, D contemplated for the purposes of the provisions of section 115BBE of the act. It is also the contention of the assessee that, the provisions of section 115BBE of the act was amended by taxation law second amendment act 2016 which is w.e.f 05.12.2016. In the case of the appellant the above income was quantified during search conducted on 24.06.2016 and much before the Taxation Law Second Amendment Act 2016 came to being, as such the rate of 60% which came into force from 05.12.2016 could not have been applied, but the rate of 30% which was in existence as on 24.06.2016 should have been levied. 16.3 The ld. A.R. submitted that on appeal the ld. CIT(A) has disposed off the appeal in ITA No. CIT(A)-2/PNJ/10207/2018-19, dated 31.10.2023 partly allowing the appeal. The relief al....
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.... act. Rs. Stock with gold smith 1,59,69,750/- Undisclosed stock 93,63,957/- Undisclosed stock (at Shop) 1,52,07,375/- Undisclosed sale of silver 6,45,344/- ---------------------- 4,11,86,426/- Undisclosed stock (Residence) 1,36,73,614/- -------------------- 5,48,60,039/- -------------------- 16.4.3 He submitted that the ld. CIT(A) has held that, the stock valued to the extent of Rs. 4,05,41,082/- and undisclosed sale of silver of Rs. 6,45,344/- totally amounting to Rs. 4,11,86,426/- as detailed below to be brought to tax under the provisions of section 28 of the act and stock at residence valued at Rs. 1,36,73,614/- to be taxed under the provisions of section 115BBE of the act. Rs. Stock with gold smith 1,59,69,750/- Undisclosed stock 93,63,957/- Undisclosed stock (at Shop) 1,52,07,375/- Undisclosed sale of silver 6,45,344/- ---------------------- 4,11,86,42....
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....y in the finding. It may point out that particular material was not considered or the enquiry made was not reasonable or was half heartedly done. The onus lies and shifts based on the rate of the evidence on the side of the assessee and the AO. If the conclusion of the AO is adverse, it is incumbent on the AO to intimate or show cause the assessee on the proposed action. 5.6 In this case, it is seen from the assessment order that the appellant was not confronted about invoking section 69B of the act. Without any hint, the AO concluded that the unaccounted stock in the books of the appellant on the date of the search represent undisclosed investment of the appellant and taxed accordingly. In doing so, the AO had not sought any explanation regarding the source of such investment. On the contrary, the appellant had repeatedly stated during the search and afterwards that the unaccounted stock is part of its business activities and therefore, represents the unaccounted business income of the appellant. The AO used the work "undisclosed investment" in the assessment order interchangeably which was not found in the statement of the appellant. In any case, the terms unaccounted in....
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....radesh) * CIT V. S.K.Srigiri & Bros (2008) 171 Taxman 264 (Karnataka) * Overseas Leathers V. DCIT (2023) 152 Taxmann.com 595 (Chennai-Trib) 5.9 It is also incomprehensible that any assessee would invest in business stock the unexplained money earned from other sources because at some point of time, the income earned out of such business stock has to be offered to tax and thus there is no apparent advantage or logic to invest the unexplained money in business assets. Therefore, I am convinced that the investment made in business asset/inventory is to be treated as business income. Hence, the unaccounted stock found of Rs. 4,05,41,082/- is to be taxed u/s. 28 of the I.T.Act instead of section 69B of the Act. The grounds of appeal in this regard are allowed accordingly." 16.4.6 He relied on the findings of the Hon'ble CIT(A) and also the various judgements he has referred to in para 5.8 of the order extracted above. He submitted that, the ld. CIT(A) has rightly held that, the total amount of Rs. 4,05,41,082/- is assessable as business income u/s. 28 of the act and not under the provisions of section 115BBE of the act. 16.4.7 He further relied on the ra....
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....on record any iota of evidence to demonstrate that the assessee had any other source of income except income from business and, therefore, it is our considered view that deeming such income under the provisions of sections 68 or 69 would not hold good. In our view, in such a situation, the AO could not have legally and validly resorted to taxing the income of the assessee at the rate of 60% in terms of provisions of section 115BBE of the Act. 10.18 The Hon'ble Andhra Pradesh High Court in the case of Principal Commissioner of Income Tax Vs. Deccan Jewellers Ltd. reported in (2021) 438 ITR 131 (AP) held that where the assessee was engaged in the business of Gold and Diamond jewellery and Silver articles and during the search and seizure operation u/s 132, excess stock was found to be declared and the assessee had submitted that excess stock was result of suppression of profit from business over the years and the same had not been kept identified separately and the AO had duly considered and accepted the assessee's explanation that investment in excess stock was to be treated as business income, the revisional powers invoked by the Principal Commissioner u/s 263 of the A....
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.... his arguments before us. However, after going through the aforesaid judgement of the Hon'ble Punjab & Haryana High Court, it is seen that in that particular case, the only issue was with regard to the cash surrendered at the time of survey and no other income. The cash found could not be related to the already disclosed and accepted source of income of the assessee and, therefore, the Hon'ble Punjab & Haryana High Court held that such surrendered cash was to be treated as deemed income u/s 69 of the Act. However, in the present case before us, the assessee has only one source of income i.e. business income and nowhere has it been brought on record that the assessee had any other source of income except business income and, therefore, we respectfully state that judgement of the Hon'ble Punjab and Haryana High Court in the case of Kim Pharma Pvt. Ltd (supra) would not apply on the facts of the present case. 10.23 Accordingly, keeping in view the various judicial precedents as cited above and respectfully following the same, we hold that the AO could not have legally invoked the provisions of section 115BBE of the Act in the present case and further the Ld. CIT(A) wa....
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.... and paid taxes under the regular provisions of the act. The Assessing Officer in the order of assessment has held that, this income is assessable under the provisions of section 115BBE of the act and taxes are to paid at higher rates. On appeal the ld. CIT(A) has held that, this cannot be an addition u/s. 69B of the act as brought out in the order of assessment and therefore the taxes are to be paid under the regular provisions. The relevant findings of the ld. CIT(A) are in para 5.12 of his order is extracted hereunder:- "5.12 As far as the shortage of physical stock of silver in the office of the appellant at Hassan, the AO rightly concluded that the shortage of silver to the extent of 15.008 kgs represented unaccounted sales in the hands of the appellant firm. The value of such unaccounted sales was arrived at Rs. 6,43,344/-. This amount was also treated as unaccounted investment and taxed u/s. 69B r.w.s 1115BBE. Since, the amount represents absence of business asset in the hands of the appellant, this does not represent any investment or bullion, jewellery etc found for which the source of investment could not be explained, no addition u/s. 69B is legally valid. There....
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..... 16.4.15 He requested us to consider its submission to Ground No. 2 above. GROUND No. 5 OF THE REVISED GROUNDS OF APPEAL (e) The CIT(A) erred in holding that the investments of Rs. 1,36,73,613/- only are to be taxed u/s. 115BBE and the balance of Rs. 4,11,86,426/- should be taxed at normal rates, ignoring the fact that the entire declaration of Rs. 5,48,60,039/- has been made voluntarily by the assessee. 16.4.16 He requested us to consider its submission to Ground No. 2 above. GROUND No. 6 OF THE REVISED GROUNDS OF APPEAL (f) The CIT(A) ought to have appreciated the fact that even though the sources for investment made by the assessee are from income generated from jewellery business, the investments made partakes the character of undisclosed income. 16.4.17 He requested us to consider its submission to Ground No. 2 above. GROUND No. 7 OF THE REVISED GROUNDS OF APPEAL (g) The CIT(A) erred in giving relief to the assessee without going into the merits of the case. 16.4.18 He requested us to consider its submission to Ground No. 2 above. Respondent Appeal in ITA/1156/Bang/2023 16.5 The ld. A.R. submitted that re....
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....of the firm. The Assessing Officer has accepted the returned income and taxed the whole of excess stock of jewellery found u/s. 69B of the act. He referred to para 6.1 and 6.3 of the assessment order. The Assessing Officer held jewellery stock found at residence as undisclosed investment and added u/s. 69B of the act and levied tax u/s. 115BBE of the act. Under the circumstances, it cannot be held that, stock of jewellery found at residence is assessable u/s. 69B of the act and taxes leviable under the provisions of section 115BBE of the act. However, the Commissioner of Income Tax (Appeals) while passing appeal order has accepted partly explanation of the appellant held that Rs. 4,05,41,082/- is taxed u/s. 28 of the act, whereas the jewellery found in residence of partner of Rs. 1,36,73,614/- is taxable u/s. 69B of the act liable at 60% to tax u/s. 115BBE of the act. For having accepted the business income declared in the return filed the said stock found at residence could not have been brought to tax under the provisions of section 115BBE of the act instead of section 28 of the act. He relied on the ratio laid down by the High Court of Madras in the case of CIT V. P. Balasubrama....
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...., section 69B, section 69C or section 69D, the income tax payable shall be the aggregate of: - (a) The amount of income tax calculated on income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, at the rate of thirty percent, and (b) The amount of income tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (a)." 16.5.6 He submitted that, since the income is quantified on 24.06.2016, the law prevailing on that day should be applied and the taxes will have to be levied at 30%. However, the above provisions were amended by Finance Act 2016 w.e.f 01.04.2017. The amendment got the president's assent on 05.12.2016. Consequent to this, the provisions read as under: - "115BBE. Where the total income of an assessee - (a) Includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D and reflected in the return of income furnished under section 139; or (b) Determined by the Assessing Officer includes any income referred to in section 68, section 69, section 69A, section 69B....
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....e Hon'ble Tribunal has held as under in the last paragraph of its decision. "Thus it is a cardinal principle of tax law as propounded by the Courts that law to be applied which is in force in the relevant assessment year unless and otherwise provided expressly or by necessary implication a clarificatory amendment by insertion of an explanation can be read into the main provision but if a change is brought in the existing law by insertion of a new provision then the same cannot be applied in the case when no such law was in force at the relevant point of time and, therefore, a new tax liability cannot be created by a subsequent amendment in respect of a transaction as well as the return of income filed when such law was not in the Statute book....." 16.5.8 The ld. A.R. requested us to consider the submissions above and hold that, for the facts and circumstances of the appellant taxes will have to be levied at 30% on the unaccounted jewellery of Rs. 1,36,73,613/- quantified during the course of search on 24.06.2016. 17. The ld. D.R. submitted that it cannot be possible to hold the value of unaccounted stock of jewellery found in the business premises of the assessee as....
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....sessee and it cannot be treated as income from other sources u/s 69B r.w.s. 115BBE of the Act. 18.2 We note that assessee is in jewellery business. The assessee had admitted excess stock found in the business premises of the assessee as well as residence of the assessee as business income and offered the same for taxation by bringing the same to P&L account of the assessee. The ld. AO accepted the returned income and taxed the whole excess stock of jewellery. The assessee has been explaining before the lower authorities that excess stock found during the course of search action had emanated from the stock of earlier years and it is nothing but the flow back of the business income earned by assessee from year to year. Unless the department is having any material to show that the assessee has earned the same from any other unknown sources of income, it is to be treated as business income only. In our opinion, when the assessee has explained that the source was from the business and except stock difference no other investment with any other asset was found and particularly, this unexplained excess stock is surrendered as business income has to be assessed as business income and not....
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.... the income under the head profits and gains of business or profession, but not under the head unexplained investment u/s. 69B of the Act. This is because, excess stock found during the course of survey does not have any independent identity as the asset is a mixed part of overall stock found in the business premises of the assessee, which in our considered view represents business income." 18.3 Being so, under the facts and circumstances of the case, we note that the assessee has declared additional income towards excess stock found during the course of search action both at the business premises of the assessee as well as partner of the assessee (Mr. Ravish) and there was no material to suggest that the assessee has not earned this income other than from the jewellery business carried on by the assessee from assessment year to assessment year and it has to be treated as income earned from the assessee only in the assessment year under consideration or earlier years from business and the same has been surrendered as income of the assessee to be treated as accordingly, especially, the ld. AO has not done anything to dispute the claim of assessee that the source was not from the ....
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.... appeal of the revenue are dismissed and grounds of appeal of the assessee are allowed. 19. In the result, appeal of the assessee in ITA No.1156/Bang/2023 is allowed and the appeal of the revenue in ITA No. 1166/Bang/2023 is dismissed. 20. In the result, appeals of the revenue in ITA Nos. 1163 to 1166/Bang/2023 are dismissed and appeal of the assessee in ITA No. 1156/Bang/2023 is allowed. Order pronounced in the open court on 10th June, 2024 ============= Document 1 (1) Seized from the office premises of Mr.RajagopalSetty and Mr. R Ravish, Vajarangi, 2nd Cross Road, Sampige Road, KR Puram, Hassan, on 24.06.2016: Sl. Exhibit No. of Description No. No. pages 1 SRS/1 157 Loose Sheets containing Sale Deed 2 SRS/2 240 Loose Sheets containing Sale Deed 3 SRS/3 95 4. SRS/4 121 Loose Sheets containing deed of reconstitution of partnership of M/s Cauvery associates. Loose Sheets containing Sale Deed 5 SRS/5 39 Loose Sheets containing Deed of partnership with Cauvery Associates 6 SRS/6 157 7 SRS/7 95 8 SRS/8 199 Loose Sheets containing valuation report and ....
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....ay Rang 1.500. ESTIMATE 385 Jewlers, M.Road, HASSAN 573 201 8172 208353 265006 konda+h+1.2400 12800 ESTIMATE 110 Ph: 8172 258353 SRS Jewellers, B.M. Read, HASSAN-573 201 265005 Studs 10640- 3.800 * 2000[+ 280 ESTIMATE 199 0472 268353 265005 SRS J, EMR HASSAN-873 201 12.600. 12516 Thilli. H.500 728 841001 ESTIMATE Phi-08172 288353 Jars M.Road, HASSAN-573 201- 255005 Da 145/16 1834-3.000 20 ESTIMATE 107 P. 08172 268353 265005 SRS JB.M.Real, HASSAN-573 201 Dre 18/5/16 Phin. Alny. 2.000 11200. ESTIMATE (x2800) 106 P08172268353 265005 -SRS Jewellers, B.M.Road, HASSAN-573 201- 2800 20/5/16 A Prundu 1.000. (2800) Document 3 Answer to question 16 of the statement recorded from Mr.Ravish in the busine premises is reproduced below: "Q16: Ans: During the course of search proceedings today in your premises, loose sheets in exhibit marked A/SRS/04 containing loose sheets 113 in number. Serially numbered loose sheets from page 104 to page 113 contains estimates of sales figures. However, the same are not in your s....