TaxTMI 
TaxTMI 
2024 (8) TMI 219
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....g grounds of appeal in ITA No.414/Bang/2024: 1. "The ld. CIT(A) erred in passing the order in the manner he did. 2. The ld. CIT(A) further erred in confirming the addition u/s 68 of the Income Tax Act, 1961 without appreciating the submission of the appellant. 3. The ld. CIT(A) further erred in confirming the order of assessing officer by merely relying on sworn statement of the partner without any incriminating material having being found. 4. The ld. CIT(A) further erred in not appreciating that return in response to notice u/s 148 was filed only on 4.1.2019 and hence the assessment was time barred. 5. The ld. CIT(A) further erred in assessing the income u/s 68 of the Act." 2.1 At the time of hearing, the assessee has not pressed ground No.4. Thus, the only ground remained for our consideration is with regard to sustaining addition u/s 68 of the Income Tax Act, 1961 (in short "The Act") at Rs. 87.25 lakhs on the basis of sworn statement recorded u/s 132(4) of the Act on 30.10.2017 without any corroborative materials. 3. Facts of the case are that the assessment order has been passed u/s 143(3) r.w.s. 153C of the Act. During the co....
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..... The AO issued notice on 18.11.2019 requiring the appellant to produce the partners, to furnish the date-wise cash flow statements of the concerned partners whom the appellant firm was now claiming that they had introduced cash, source particulars etc. It was also proposed to assess the cash payment of Rs. 102.25 lakh made by the appellant to Mr. P B Ahammed, as per the disclosure made by Mr. Mohammed Ibrahim in the sworn statements recorded on three different occasions, that too in a gap of about two months: While the appellant filed objections against the above proposal, however, it failed to produce the partners who had claimed to have made the cash investments. Further, the cash flow or books etc also had not been furnished. Only plain confirmation letters had been furnished by the appellant firm in respect of some of the partners. The AO mentioned that despite specifically calling for, the appellant firm had failed to produce the partners who have claimed to have made cash payments. Further, other evidences- called for were also not furnished. Therefore, another notice dtd. 28/11/2019 was issued to the appellant to produce the partners who were stated to have admitted introdu....
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....isclosed income of the appellant. Thus, One Managing Partner of the firm, Mr. Mohammed Ibrahim, who had signed the JDA on behalf of the firm, had voluntarily admitted in the sworn statement recorded u/s 132(4), u/s. 131 and also u/s. 132(4) again three different occasions that the cash payment of Rs. 102.25 Lakhs was the undisclosed income of the assesses and disclosed the same. 5. On appeal, the ld. CIT(A) observed that the only argument of the appellant during this proceeding is that Rs. 1,02,25,000/- paid in cash was not the undisclosed income of the appellant and addition cannot be made u/s 68 of the Act. It was the submission of the appellant that the cash payment made to Mr. PB Ahammed had been duly accounted for by the appellant as the payments were received from the partners of the appellant firm. It was the case of the appellant that by demonstrating the nature and source of the credit in the hands of the firm, the initial onus has been discharged and the burden shifts on to the department. Relying upon the Judgment of the Hon'ble Supreme Court in the case of CIT vs Lovely Exports (P) Ltd., 216 CTR 1 95, the appellant pleaded that the additions may be deleted. 5.....
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.... filed by the appellant in response to notice dated 11.10.2019. The names and confirmation statements from some of the partners with regard to cash payments were furnished on 16.11.2019 and 28.11.2019. Neither the partners who contributed the above payments were produced before the AO nor any reasons for the failure to do so was accorded. On the perusal of the list of persons who alleged to have contributed to the cash payments, it is noticed that the cash payments were in the range of Rs. 2,00,000/- to Rs. 15,00,000/- except in the case of Mr. Yousuf Subbayakatta from whom no confirmation was filed. It is also interesting to note that Rs. 3,00,000/- was shown to have been paid in cash by Mr. Mohammed Ibrahim, the Managing Partner, who had all along not disclosed this alleged fact. 5.3 If the appellant's claim was the gospel truth, it is incomprehensible as to why the appellant waited for more than 2 years to disclose this fact and that too at the far end of the assessment period. The delay can only be perceived as an attempt by the appellant to escape from the taxation of the admitted undisclosed investments in the hands of the appellant and to dodge the proceedings. It is ....
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.... Rs. 5 Lakhs in the name of one Mr. Imran. Similarly, as on 31/3/2018, unsecured loans amounting to Rs. 5 lakhs, Rs. 3.50 Lakhs and Rs. 27.82 Lakhs were reflected on the names of Mr. Imran, Mr. Abdul Ansar and Mr. Hidayathulla. 5.7 During assessment proceedings, the appellant was specifically required to substantiate the genuineness of the liability claimed by proving the identity, genuineness and creditworthiness of the credits shown. However, the details and evidences were not furnished in spite of specific direction of the AO. 5.8 Considering the failure on the part of the appellant to substantiate the nature and source of Rs. 5 Lakhs for the A/Y 2017-18 and amount totaling to Rs. 31,32,000/- for the A/Y 2018- 19 credited in the books of accounts during the above years as unsecured loans, Rs. 5 Lakh and Rs. 31,32,000/- were added as unexplained cash credits u/s. 68 of the Act for A/Y 2017-18 and 2018-19 respectively. 5.9 No explanation was offered by the appellant in respect of the above additions during this proceeding despite several notices and opportunities provided. Therefore, the additions made i.e. Rs. 5 Lakh and Rs. 3 1,32,000/-for A/Y 2017-18 and 2018-19 respec....
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....the same. The AO has not enquired into anything vaguely not believing on the particular as filed by the assessee is bad in law. 6.5 She submitted that the ld. AO was wrong in placing reliance on the judgment of Honorable Madras High Court in the case of B. Kishore Kumar vs. DCIT (supra) because the facts of that particular case are clearly different and distinguishable from the facts in this particular case of the assessee firm. The well settled position of law is that while the revenue can use a statement recorded u/s 132(4) as a piece of evidence but the statement itself cannot be conclusive evidence. The revenue ought to corroborate the admission contained in the statement with independent evidence. 7. On the other hand, ld. D.R. submitted that statement recorded u/s 132(4) and 131 of the Act which is not retracted by assessee and this is important evidence and it can be basis for initiation of proceedings u/s 153C of the Act. For this purpose, she relied on the judgement of Hon'ble Supreme Court in the case of Roshanlal Sanchiti Vs. CCIT 292 Taxman 549 (SC). 7.1 Further, she relied on the judgement of Hon'ble Supreme Court in the case of Video Master Vs. JCIT (378 ITR ....
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....e that there was no suppression. Thirdly, the Tribunal has stated that there was no corroborative material to substantiate the contents of the loose papers found during the search. We are not impressed by this reason at all. The papers are not denied or disputed by the assessee. The CIT (Appeals) has found that the partners of the assessee firm had admitted to the practice of suppressing the profits. The papers themselves show two different rates, one higher and the other lower and on comparison with the sale bills it has been found that the sale bills show the lower rate and these findings have not been denied by the assessee. The Tribunal, therefore, erred in looking for some other corroboration to substantiate the contents of the loose papers, overlooking that the loose papers needed no further corroboration and the sale bills compared with the seized papers themselves corroborated the suppression of income. Fourthly, the Tribunal has relied on the observations of the CIT (Appeals) that no serious consideration can be given to the loose papers and has held that this shows that there is "nothing more in Revenue s kitty apart from those said loose papers pertaining to November, 20....
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....ai Bench in the case of Ali Akbar Sami Chowdhari Vs. DCIT in ITA No.455/Mum/2024 for the assessment year 2015-16 order dated 17.5.2024, wherein held as follows: 10. "In the statement of Shri Sandeep Runwal the list is attached wherein Shri Sandeep Runwal has given the details of cash received on sale of flats at various projects of the Runwal Group with names of the customers and the exact amount. The name of the assessee is at Sl.No.21 for the Flat No. 501 at Runwal Elegante which shows the cash receipt by Runwal Group of Rs..82,13,261/-. The contention of the counsel that it is merely an estimation defies all commercial logic because an estimated figure is always a complete figure. But the figure mentioned hereinabove is so accurate that it cannot considered as an estimated figure. Most important fact is that the recipient i.e., seller has admitted of having received a cash component of the transaction. Therefore, it is reasonable to conclude that the payee must have made the said payment. The undisputed fact is that the assessee has in fact purchased the flat from Runwal Group. When the purchase is not in dispute, the payment is not dispute then in all probability the c....
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....ourt in the case of CIT Vs. Metal & Metals of India (208 CTR 457) (P&H) d) CIT Vs. Keval Krishna & Partners (18 DTR 121) 8.2 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 is nothin....
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....s 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 under coercion/u....
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.... 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 an inculpatory state....
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....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." (ii) In the case of 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 assessee. Accordingly, a....
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....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 error in ignoring the retraction made by the assessee." "16.4 We have duly considered the contention of the assessee and a....
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....arwal (2008) 300 ITR 426 (All) (ix) CIT vs. Dinesh Jain (HUF) 352 ITR 629 (Del) 8.10 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) 8.11. Further, the Hon'ble Delhi High Court in the case of CIT vs. Dinesh Jain (HUF), 352 ITR 629 after referring to the decision of the Hon'ble Supreme Court in the case of Lalchand Bhagat Ambica Ram vs. CIT (1959) 37 ITR 288 (SC) held that no additio....
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....tioned balance amount as there was no confirmation which required verification from the end of the ld. AO as this is said to be contributed by the assessee's firm. The assessee was to prove all the ingredients of section 68 of the Act subject to the condition that these ingredients are appearing in the books of accounts of the assessee and not on the basis of statement recorded u/s 132(4) or 131 of the Act or uncorroborated seized materials in the form of loose slips. Yousuf Subbayakatta - Rs. 49,75,000/- Muttam Khalid - Rs. 2,50,000/- Total: - Rs. 52,25,000/- 8.16 Thus, the only issue relating to addition of Rs. 52.25 lakhs made u/s 68 of the Act is remitted to the file of ld. AO for fresh consideration. 8.17 There was another addition of Rs. 5 lakhs made by ld. AO u/s 68 of the Act, which is said to be received from Mr. Imran in the assessment year 2017-18. 8.18. The ld. A.R. submitted that placing reliance on the seized material is not proper and all the additions on the basis of the above loose slips should be deleted in the assessment year 2015-16 since; (i) there is no documentary evidence either to support the statements of Mr. R.....
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....redit appearing in the balance sheet as n 31.3.2017 excluding the opening balance. Accordingly, this issue is remitted to the file of ld. AO for reconsideration on similar lines as in assessment year 2017- 18. 12. In the result, ITA No.415/Bang/2024 is partly allowed for statistical purposes. ITA Nos.167 & 168/Bang/2024 (AYs 2017-18 & 2018-19) Tabesco Hindustan Infra Developers Pvt. Ltd.: 13. Now we will adjudicate ITA Nos.167 & 168/Bang/2024 for the AY 2017-18 & 2018-19. Though the appeals were filed by different assessees, the issue in both these appeals are common, hence, these are clubbed together, heard together and disposed of by this common order for the sake of convenience. The assessee in ITA No.168/Bang/2024 has raised following grounds of appeal: "1. The learned CIT(A), erred in passing the Order in the manner he did. 2. That the assessment made without jurisdiction and hence proceeding under section 153C is void ab initio. 3. The learned CIT(A) failed to appreciate that in absence of any incriminating material the assumption of jurisdiction under section 153 C is wholly illegal and liable to be quashed. 4. The learned CIT(....
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....struction contract agreement between M/S MKH Infrastructure and M/S Tabesco Hindustan Infra Dev. Pvt. Ltd. was executed on 16th Nov, 2016 to construct the structural part of the Residential cum Commercial project 'Tabesco Inn' for a total cost of Rs. 41,88,34,000/-. However, later on, this contract agreement was cancelled by both the parties and an item-wise approach was agreed upon. During the course of search at the residences of Mr. Mohammed Ibrahim, Mr. Ibrahim Khaleel, etc., documents belonging to the assessee have been seized. During the course of survey at the business premises of M/S Tabesco Hindustan Infra Developers Pvt. Ltd., the evidences regarding payments in cash and cheque made to the assessee were found and impounded. Sworn statements were recorded from Mr. Ibrahim Kaleel and Mr. Mohammed Ibrahim on various dates, who admitted to the contract receipts in cash and cheque as detailed in the seized materials. 14.1 During the course of the search in the case of Mr. Ibrahim Kaleel at his residence, incriminating materials inventoried as A/IK/03 have been seized. Page No: 83 to 91 contain the details of cash vouchers received, which were signed by Mr. Ibrahim K....
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....en much more than what Mr. Ibrahim Kaleel had stated in the sworn statements. The seized materials also contained connected expenditures entered each day against the receipts and the fact that the cash balance was arrived at the end of each day, clearly proves that the cash receipts were genuine and the details recorded in the seized materials were accurate, corroborative and self-explanatory in nature. 14.4 It was also seen that as per the material inventorised as: A/THI/8 - page 7, impounded from the office of M/s. Tabasco Hindustan Infra Developers Pvt Ltd during the course of survey u/s. 133A, the total payments made to the contractor; M/S. MKH Infrastructure amounted to Rs. 2,90,30,600/-, of which Rs. 2,00,30,600/- had been paid as CASH and Rs. 90,00,000/- in cheque marked 'TOTAL PAID WHITE'. These entries correspond and correlate to the entries made in the seized book from the residence of Mr. Ibrahim Kaleel: A/1K/9. 14.5 Mr. Mohammed Ibrahim, the MD of M/S Tabasco Hindustan Infra Developers Pvt Ltd had admitted in the sworn statement recorded u/s. 132(4) on 31/8/2017 that out of the total payment of Rs. 2,90,30,600/- made to M/S. MKH Infrastructure for the construc....
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....d reflected in the ledger of the assessee of company in name of Mr. Ibrahim at pages 24 to 26 of the seized material marked as A/THI/8 impounded from business premises of assessee. According to the ld. AO, this transaction not reflected in the books of accounts of the assessee. On questioning the MDA Md. Ibrahim admitted this statement in his statement recorded u/s 132(4) of the Act recorded on 31.8.2017 and also on 30.10.2017 and also on 5.9.2017 vide statement recorded u/s 131 of the Act. However, the searched team not at all carried out enquiry with the recipient of the statement. The ld. AO solely relying on the loose slips found during the course of search action coupled with the statement recorded u/s 132(4) of the Act, addition was made. According to the ld. AO in spite of issuing several chances the assessee has not furnished any evidence either to explain the source of the cash or to prove that the transactions are already booked in the accounts. Thus, he made an addition of Rs. 28 lakhs in the assessment year 2017-18. Now the contention of the ld. A.R. is that the addition is based only on the loose slips based on statement recorded u/s 132(4) of the Act and unsubstantiat....
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....d 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. 15.5 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 papers found during the search because addition on account of alleged payment made simply on the basis of uncorroborated noting and scribbling on loose sheets made by some person have no evidentiary value and is unsustainable and bad in law. 15.6 The Hon'ble Supreme Court in Common Cause (A Registered Society) v. UOI [2017] 394 ITR 220 (SC) observed with regard to evidentiary value that entries in books....
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....ies, 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. 15.7 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 belong to him. 15.8 Therefore, the addition made by the AO is only on the basis of surmises and conjecture without bringing any cogent material on record to substantiate that the assessee was engaged in the business of gold and jewellery and the AO had not brought any material on record to substantiate that the denial of the assessee was false. Unless the burden of proving that the materials and cash belong t....
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....asis of issuing the Show-Cause Notice, (para 8)" 15.10 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. 15.11 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 information gathered by Investigation Wing of Department, which had not been independently subjected to further verification by Assessing Officer and he had not provided copy of such statements to assessee, thus, denying opportunity of cross examination to assessee, who on other hand, had prima facie discharged initial burden of substantiating purchases through various documentation including purchase bills, transportati....
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....is that a non-speaking 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 assessment to be framed pursuant to search and seizure action. In these cases, moreover the documents are relied upon by the AO without confronting to any parties i.e seller or buyer of unaccounted transactions. These documents cannot bring assessee into tax net by merely pressing to service the provision of Sec 132(4A) r.w.s Sec 292C of the IT act, which creates deeming fiction on the assessee subject to search wherein it may be presumed that any such document found during the course of search from the possession and control of such document are true. What has to be noted here is that deemed presumption cannot bring such a document in the tax net and the presumption is rebuttable one and the deemed provisions have no help to the department. Therefore, in these cases addition is made by AO on arbitrary basis relying on the loose papers, containing scribbling, rough and vagu....
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....annot be sustained. Accordingly, the addition made in the assessment year 2017-18 is deleted. 15.20 In the result, the appeal of the assessee in ITA No.167/Bang/2024 is partly allowed. ITA No.168/Bang/2024 (AY 2018-19) 16. In this assessment year, assessee in ground Nos.6 to 11 challenged additions of Rs. 3,58,14,436/- made by ld. AO on the basis of declaration made u/s 132(4) of the Act. Grounds Nos.1 to 5 not pressed before us and the same are dismissed as not pressed. The above addition consists of following: (i) Unexplained investment for building construction u/s 69B of the Act r.w.s. 115BBE of the Act 1,90,30,600/- (ii) Unexplained expenditure u/s 69C r.w.s. 115BBE of the Act 59,00,000/- (iii) Unaccounted cash receipts 1,10,90,104/- Total 3,60,20,704/- 16.1 In this assessment year, first addition has been made at Rs. 1,90,30,600/- for unaccounted investment in the construction, which is based on the seized material A/THI/8 page 7, which shows the payment to MKH Infrastructure. 16.2 As discussed in earlier para of this order in ITA No.167/Bang/2024 for assessment year 2017-18, this addition is deleted. 17. Next addit....
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....8/2013-IT (Investigation Section) dated 18.12.20214, which disentitled the revenue authorities to take confessional statement from the assessee. 18.1 Further, the ld. AO cannot solely rely on the statement recorded u/s 132(4) of the Act as recently held by Hon'ble Delhi High Court in the case of PCIT Vs. Pavitra Realcon Pvt. Ltd. reported in ITA No.579/2018 dated 29.5.2024, wherein held as under: "17. We have heard the learned counsels appearing on behalf of the parties and perused the record. 18. The primary grievance which arises 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 w....
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....ed to make additions in the absence of any evidence to corroborate the same. The relevant paragraph of the said decision is extracted herein below: - "20. In our view, a plain reading of section 158BB(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words "evidence found as a result of search" would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and 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....
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....found during the course of search under Section 132 or requisition under Section 132-A of the 1961 Act. 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] 26. This Court in the case of CIT v. Kabul Chawla, has explicitly noted that the information/material which has been relied upon for assessment 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 c....
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.... and that those assessments are not liable to be revised unless the material obtained have a bearing on the determination of the total income. This aspect was again emphasised in para 38 of RRJ Securities with the Court laying stress on the existence of material that may be reflective of undisclosed income being of vital importance. All the aforenoted judgments thus reinforce the requirement of incriminating material having an ineradicable link to the estimation of income for a particular AY." [Emphasis supplied] 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. 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 ex....
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.... hand, pertains to the non-searched entity and in respect of whom any material, books of accounts or documents may have been seized and were found to belong to or pertain to a person other than the searched person. As in the case of Section 153A, Section 153C was also to apply to all searches that may have been undertaken between the period 01 June 2003 to 31 March 2021. In terms of that provision, the AO stands similarly empowered to undertake and initiate an assessment in respect of a non-searched entity for the six AYs' 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 i....
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....Ys, one must first identify the FY in which the search occurred, leading to the identification of the AY relevant to the previous year of the search. The block of six AYs will then be those immediately preceding the AY relevant to the search year. For a search assessment under Section 153C of the Act, the only difference is that the previous year of the search is replaced by the date or year in which the seized books of accounts, documents, and assets are handed over to the jurisdictional AO, rather than the year of the 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., w....
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....t cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their exfactory prices remain static. It was not for the Tribunal to have guesswork as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them." [Emphasis supplied] 32. Additionally, the Supreme Court in the case of State of Kerala v. K.T. Shaduli Grocery Dealer, held that tax 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 ....
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....so be placed upon the decision in the case of CIT v. Micron Steels P. Ltd., whereby, it was held that the jurisdictional defects cannot be cured under Section 292B of the Act and they render the entire proceedings null and void. 35. In the present case, it is seen that the Revenue has failed to allude to any steps which were taken to determine that the seized material belonged to the respondent-assessee group. Notably, the satisfaction note has also been prepared in a mechanical format and it does not provide 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 dis....
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..... However, later on, this contract agreement was cancelled by both the parties and an item-wise approach was agreed upon. 21.2 During the course of search at the residences of Mr. Mohammed Ibrahim, Mr. Ibrahim Khaleel, etc., documents belonging to the assessee have been seized. During the course of survey at the business premises of M/S Tabasco Hindustan Infra Developers Pvt. Ltd., the evidences regarding payments in cash and cheque made to the assessee were found and impounded. Sworn statements were recorded from Mr. Ibrahim Kaleel and Mr. Mohammed Ibrahim on various dates, who admitted to the contract receipts in cash and cheque as detailed in the seized materials. 21.3 As regards the argument of the assessee that the construction agreement was cancelled is concerned, the director of the assessee Mr. Ibrahim Kaleel stated in his statement of oath u/s 132(4) as under: "Q. 35. Please explain your involvement in the Partnership Firm MKH Infrastructure. Please give details about the partners in MKH Infrastructure. Ans: MKH Infrastructure was formed in 2014 as a partnership between Mr. B. Ibrahim and myself, Ibrahim Khaleel, Mr. B.A Ibrahim is a grocery shop ow....